Govt announces steps to arrest slowdown; more on way

Finance Minister Nirmala Sitharaman at a press meet in New Delhi. (AFP Photo)

The government on Friday unveiled a slew of measures to address the slowdown in the economy that included relief to the automobile sector, withdrawal of surcharge on foreign investors, easing of tax laws for startups and an upfront release of Rs 70,000 crore of capital to PSU banks that could help them up their lending.

“The surcharge on foreign portfolio investors stand withdrawn, the pre-Budget position is restored. It is being done to encourage investment in the capital market,” Finance Minister Nirmala Sitharaman said, reversing a Budget decision but not before 50 days during which FPIs (foreign portfolio investors) withdrew over Rs 27,000 crore from the capital market.

The minister, however, made it clear that the new surcharge levied on high net worth individuals (HNIs) was to stay and would be reviewed only two years later in 2022.

In the Budget for 2019-20, Nirmala had proposed to enhance the rate of surcharge to 25% for individuals earning between Rs 2 crore and Rs 5 crore and 37% for those earning over Rs 5 crore. It, however, impacted a large number of foreign portfolio and domestic equity investors.

The government may, through an executive order, withdraw the part of the surcharge and later remove it from the Finance Act through an ordinance. To boost demand for automobiles, facing one of the worst slowdowns, the government will restart buying new vehicles and phasing out the old ones.
At present, government departments are banned from buying new vehicles and replacing the old ones. The minister promised more steps to arrest the slowdown, including one more announcement on housing sector next week.

In a major relief to the MSME sector facing fund shortage, Nirmala announced that all their pending GST refunds will be paid within 30 days. In future, their GST refunds will be paid within 60 days from the date of application.

A Rs 20,000-crore liquidity support to the housing finance companies was also announced along with an assurance from bankers to link their auto and home loan rates to RBI’s repo rate, a move that will see automatic reduction in interest rate by banks each time the RBI reduces repo rate.

The industry hailed the minister, but the announcements were so large that social media preferred to call it the government’s third Budget in a year.

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