Published 15:27 IST, September 20th 2019
PM Modi lauds measures to boost the economy. Here is a summary
PM Narendra Modi lauded the financial announcements made in the last few weeks to boost the Indian economy. Here is a short summary of the Centre's measures.
On Friday, Prime Minister Narendra Modi lauded the financial announcements made in the last few weeks. He opined that this demonstrated the government’s desire to transform India into a better place for business. PM Modi contended that the endeavour was to increase opportunities and prosperity for every section of the society. He reiterated that the final goal was to make India a $3 trillion economy. His comments came after Union Finance Minister Nirmala Sitharaman declared a reduction of the corporate tax on the domestic firms.
Here is a short summary of all measures spelled out by the government in recent times:-
First Set of Reforms
The government introduced a slew of reforms impacting the automobile, Medium, Micro and Small Enterprises (MSMEs), tax and other sectors on August 23. This included the promise to initiate the scrappage policy, lifting the ban on government departments to purchase new vehicles, extending the operational period of BS-IV vehicles and cheaper loans. Sitharaman said that banks would pass on the Reserve Bank of India rate cut benefits to borrowers. Moreover, to tackle the menace of ‘tax terrorism’, a centralized system for Income Tax notices was promulgated.
FDI norms eased
Five days later, the government approved 100% FDI in coal mining and all related processing activities and contract manufacturing under the automatic route. Previously, 100% FDI was permitted only in captive coal mining. It also paved the way for 26% FDI in digital media. The government's decisions impacted the single-brand retail sector too. The earlier rule that mandated online retailing only after opening a physical store was relaxed. Additionally, the compulsory 30% local sourcing requirement was done away with.
Bank mergers and governance
Subsequently, the Finance Minister announced the merger of 10 public sector banks into 4 big banks. After the merger concluded, only 12 public sector banks remained and that, the 4 new banks would garner about 82% of the total public sector banking business in India. The boards of the public sector banks were empowered to ensure accountability of the management. Moreover, it was decided that the Chief Risk Officers would now be appointed from the market. Also, the tenure of top-ranking officials was enhanced.
Housing, real estate and export sector reforms
The Centre embarked on reforms in the real estate, housing, and export sectors of the economy on September 14. First, an Rs.10,000 crore special window was created to provide last-mile funding for the completion of ongoing housing projects which are not Non-performing assets (NPAs) or facing bankruptcy proceedings under National Company Law Tribunal. Furthermore, Sitharaman made the announcement that the External Commercial Borrowing (ECB) guidelines would be relaxed to facilitate the financing of home buyers who are eligible under the Pradhan Mantri Awas Yojna (PMAY), in consultation with Reserve Bank of India. Export sector reforms included the extension of the scope of Export insurance, automatic electronic refund and the adoption of mandatory technical standards.
Income tax reforms
The latest set of reforms on Friday come in the form of slashing the corporate tax to 25.17% inclusive of all cess and surcharges, for domestic companies. The current corporate tax has been brought down from 30% to 22%. For the listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged. The higher surcharge will not apply on capital gains on the sale of security including derivatives held by Foreign Portfolio Investments. Sitharaman stated that these amendments would be brought into action via the Ordinance route.
Updated 16:03 IST, September 20th 2019