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Beating slowdown blues

DNMUM442807 | 9/12/2019 | Author : Team DNA | WC :2776

India Inc hopes the slew of measures announced by the government recently would kickstart investments and help reboot the economy over the next few quarters
After the announcement of the first-quarter GDP numbers that slipped to over six-year low, stock markets went into a tailspin over concerns of slowdown and its likely impact on the growth going ahead. To make matters worse, dwindling automobile sales over the past 6-8 months, job losses in the sector and waning consumer demand have fuelled concerns of challenging times ahead. To put growth back on the track, the government over the past few weeks announced several fire-fighting measures to revive the slowing economy. Measures such as additional credit of Rs 70,000 crore to banks, quick clearance of pending GST refunds within 30 days to the MSME sector, enhancement of liquidity support to housing finance companies and expec
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Vikram Kirloskar
Vice Chairman, Toyota Kirloskar Motor
The government recently announced a host of measures for encouraging growth of the Indian economy, amidst a global weakening of demand and trade slowdown. The comprehensive measures announced by the finance minister Nirmala Sitharaman is expected to provide stability to the Indian economy by enhancing investor sentiment and reviving markets.
The Indian economy in the fourth quarter of 2018-19 witnessed a modest growth of 5.8% and the set of announcements will provide a much-needed boost to revive growth. Additionally, measures announced for attracting more FDI by relaxing norms in single-brand retail, among other measures, are also expected to spur economic activity.
The stimulus package directed across multiple sectors of the economy with its six-dimensions is aimed at sectors such as MSMEs, auto, the financial sector, etc. which are key drivers of demand and growth in the economy. While industry welcomes these measures, the important point to note is that the government has consulted with multiple stakeholders including businesses and has taken care to address their different concerns related to liquidity, access to credit and demand slowdown. This is the best way to formulate policies in these challenging times when global trade factors are impacting all economies.
The government’s decision to remove enhanced surcharge on foreign portfolio investment (FPI), earlier levied in the budget, is a positive move that will encourage capital markets and infuse greater investor confidence in the economy. This is in line with CII recommendations in equity markets and will help reverse the outflows that the economy witnesses post the announcement of the surcharge during the budget.
The announcement to frontload additional credit of Rs 70,000 crore to banks as announced in the Budget will ease the liquidity squeeze and encourage greater lending at the earliest. Additional credit support for houses and vehicles is likely to kickstart investments in the economy. Taken together, these help customers to improve their spending sentiments.
A number of key measures were announced for the MSME sector including quick clearance of pending GST refunds within 30 days, which will unlock held up working capital for the MSMEs and enhance liquidity in the sector. In a bid to provide an impetus to the infrastructure sector, it was announced that delayed payments would be monitored by the Department of Expenditure. A separate financial institution for credit enhancement to the sector is also under consideration which will encourage capital expenditure in the sector.
Overall, the slew of measures announced is well thought out and address the major pain points across the sectors. These will encourage positive sentiment and go a long way towards creating necessary growth impulses. We are confident that with an ongoing reform agenda underway, demand and investments will pick up from the third quarter.

Sanjiv Bajaj
Chairman, CII Western Region Council
Several announcements were made by the finance minister at the end of last week aimed at reviving the slowing economy. These measures have had a huge impact on business sentiment even if they are not expected to turn around the economy in the immediate future. The economy grew at a modest pace of 5.8% in the last quarter of 2018-19 and may face challenges in reprising a high growth rate due to global issues. The fact that the government is listening and is willing to act has been communicated.
What has also been communicated is that the government is taking care not to pressure the fiscal deficit and to maintain macroeconomic stability. Many of the measures are aimed at better implementation of existing announcements. For example, the GST refunds are being paid out within a timeline, delayed payments to the private sector are being sorted out and a shelf of infrastructure projects is being identified for implementation. This approach is very much in line with the industry’s wishes.
The announcements for the banking and NBFC sector inspire confidence that liquidity will be a high priority. Encouragement is being given to the sector to boost lending, including the issue of anxiety among bank officials. It is indeed heartening that such issues are being recognised and addressed.
The finance minister also stated that more measures are underway and in fact, since then, significant changes to the FDI regime have been announced in certain sectors, as promised. In the next round, some measures are needed to provide relief to the stressed real estate sector. CII has recommended that input tax credit be available to the entire real estate sector under GST and that the sector be given infrastructure status. Exporters are also in need of assistance and measures are needed to make exports truly free of any domestic taxes.
A new framework for direct taxes is required to provide a growth focus and make the country more attractive as an investment destination. Currently, the tax rates are too high in comparison with competitors. What is needed is a lower tax rate together with the removal of exemptions. The task force on the Direct Tax Code has submitted its recommendations to the finance minister and we are confident that these would be taken up as soon as possible.
On its part, the industry can take measures to overcome the downturn. Firms should pursue their long-term strategies to enter new markets, design innovative products and increase efficiencies. Indian firms need to look outward to reduce their dependence on domestic demand. With the current flux in global trade, this may be a good time for Indian products to increase their presence in the global market. For this, Indian firms need to raise their focus on R&D and innovation.
With both government and industry working to improve the competitiveness of Indian products, a sustained recovery in growth should be possible soon and the country can again emerge as the most promising investment hotspot in the world.

Ashishkumar Chauhan
The finance minister announced a series of measures resembling a mini-budget, which included removal of enhanced surcharge on foreign and domestic equity investors, simplified KYC norms, credit support for purchase of houses, automobiles, consumption goods, exemption of start-ups from ‘angel tax’, a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks, in its effort to boost economic growth. The measures touch upon both the demand and supply side, as well as long-term and short-term factors.
The capital markets have already responded positively with the benchmark S&P BSE Sensex rising 792 points or 2.2% on August 26, 2019. The transfer of Rs 1.76 lakh crore by RBI to the government will provide fiscal stimulus, as well as help in the recapitalisation of government-owned banks and funding for infrastructure. With the global economy facing headwinds and slowdown in trade, the economic package coupled with RBI surplus imparts confidence and stability to everyone in the business and sends out a clear message that this government is intent on solving all issues by discussions and taking steps that are necessary.
Funding the banks by an additional Rs 70,000 crore will go a long way in improving the market confidence on an immediate basis. The instant removal of FPI tax is a very short-term meas

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