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Govt unveils package to spur economic growth

Finance minister Nirmala Sitharaman has announced measures to revive growth, boost consumption and uplift investor and consumer sentiment. 

key announcements:  

Investors

  1. Enhanced surcharge on FPIs stands withdrawn. Surcharge on domestic investors in equity markets also withdrawn. 
  2. Aadhaar-based KYC for opening demat accounts and investment in mutual funds. 
  3. Govt working to bring offshore rupee market to domestic market.  
  4. Govt to consult with RBI to enhance Credit default swap options.  

Industry:  

  1. CSR violation would be treated as a civil offence, not a criminal offence.  
  2. All pending GST refunds till now shall be paid in 30 days. Future GST refunds to be paid in 60 days.  
  3. Govt to simplify the GST system 

Auto sector:  

  1. BS-IV cars purchased till March 2020 to remain operational for the entire period of registration. 
  2. Govt asks its departments to replace old vehicles. 
  3. Higher vehicle registration fee deferred to June next year.  
  4. Higher depreciation for all vehicle: Depreciation increased to 30 per cent for all vehicle purchased till March 2020.  
  5. Scrappage policy to be announced soon. 

MSMEs:  

  1. Govt withdraws angle tax provision for startups and their investors.  
  2. One-time settlement policy for MSME loans. Policy to be based on check box approach. 
  3. Laws to be amended to ensure one MSME definition.  

Home, auto loans:  

  1. Banks to make home, auto loans cheaper. Banks have agreed to pass on the rate cut announced by RBI to customers. Banks to launch Repo Rate linked loans.  
  2. Online tracking system for home, auto loans.  
  3. PSBs to return loan documents to customers within 15 days of loan closure.  

Income Tax: 

Govt to end tax harassment. Old tax notice to be decided by October 1.  

From October 1, all Income Tax notices must be disposed off within 3 months.  

For NBFCs:  

  1. NBFC can now use Aadhaar-based KYC
  2. Prepayment notices issued to NBFCs will be monitored by banks.  
  3. Additional liquidity to support Housing Finance Companies by National Housing Board increased to Rs 30,000 crore. 
  4. Govt to release Rs 70,000 crore upfront for PSBs recapitalisation.  

Significance and the need for these measures: 

  • For an economy that is downbeat in growth and in sentiment, the comprehensive package of measures announced may just be the right boost. 
  • They address growth slowdown concerns; free up funds for investment and spending by banks, housing finance companies and MSMEs; and importantly, undo some controversial proposals, in the budget and outside it, which were affecting sentiment in the markets and the corporate sector. 
  • And, importantly, these have all been done without any significant financial burden on the government
  • Some of the measures promote the ease of doing business and even the ease of living for ordinary citizens
  • As the festive season sets in, banks will have more space to increase their lending consequent to the upfront funding of ₹70,000 crore (announced in the budget) that they will get from the government towards recapitalisation. 
  • This, together with the strong push for repo rate linked loan products, is likely to benefit consumers borrowing to buy new homes, vehicles and durables
  • Some of the smaller steps can go a long way. Expediting delayed payments by government departments and public sector units is alone expected to release a massive ₹60,000 crore into the economy. 
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December 2022
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