A multi-sectoral, multi-dimensional policy stimulus has been strategically unveiled for key drivers of the Indian economy, at a time when the world economy is buffeted by global headwinds and trade slowdown, said a CII press statement.
Coming in the wake of several retaliatory and counter-retaliatory trade measures between the two largest global trading nations, the economic package announced by Nirmala Sitharaman, Minister of Finance and Corporate Affairs, on Friday imparts stability and underpins a new growth impetus for India, according to CII.
“The macro impact of the economic package announced can be expected to be significant It is indeed commendable that all these multi-sectoral steps were carried out without pressure on the fiscal deficit. With her six-dimensional announcement, FM has indeed hit a sixer out of the grounds,” said CII President Vikram Kirloskar.
India’s GVA growth stood at 5.8% in the fourth quarter of 2018-19 and advance indicators reveal that it might remain range-bound in Q1 FY2019-20.
The FM’s policy package covers financial sector, taxation, MSME, and automotive sector, which were being advocated by CII. CII expects that the economy will climb up in coming months.
CII’s Business Outlook Survey for April-June 2019 stood at 59.6, lower than 65.2 in the previous quarter. It revealed that as of June, two-thirds of survey respondents expected growth of over 6.5% for 2019-20.
“The comprehensive measures removing enhanced surcharge on FPIs and DIs, securing transmission of lower repo rates, addressing delayed payments and ensuring that bank officials are confident about lending are strategically targeted towards raising investments. Creation of a shelf of infrastructure projects and announcement of a long-term financial institution have wide positive ramifications for the economy,” stated Uday Kotak, President Designate, CII.
He further added that “CII and Industry are looking forward to more such announcements from the Finance Minister, as mentioned by her in her speech of 23 August.”
In the Budget 2019-20, the announcement of levy of enhanced surcharge on the FPIs had impacted the sentiments of investors in the market. Post announcement, the market saw an outflow of FPIs on a cumulative basis worth over ?22,000 crore in July and August.
Removal of surcharge on FPI investments by Ministry of Finance and the amendments in the FPI regulations by SEBI is expected to boost the investor sentiments and is in line with CII recommendations for the equity markets.
Tax measures such as alleviating angel tax on startup investors and easier long term and short-term capital gains tax promise to re-energize investments. The clogged pipeline of loans is also unblocked with various steps for banks, NBFCs and HFCs to infuse liquidity and address procedural issues.
A key measure is recognition of the fact that bank officials have turned risk averse and restoring their ability to take credit decisions. With credit momentum being restored, demand in the economy is bound to pick up in coming months, in turn leading to capacity enhancements.
For the MSME sector, which has been anxious about GST refunds being held up, access to working capital and delays in revenue receipts, a broad range of procedural measures addresses key pain points. The time-bound relief from pending GST refunds will unlock working capital and FM has assured MSME that redefinition would be top priority on her agenda.
Since the MSME Development Act was introduced in 2006, MSME have been defined by investments in plant and machinery, which is long outdated.
CII has been advocating for a new way to identify MSME based on turnover, employment and other criteria that will both provide special policies for the sector and also encourage them to grow rather than remain small to take advantage of such policies.
The decision to amend the Companies Act for making insufficient Corporate Social Responsibility spending a civil rather than a criminal matter is a sentiment booster as it addresses the trust deficit.
CII is pleased to note that the Ministry has taken cognizance of industry’s views on this provision and taken due steps by suggesting a monetary penalty and treating it as civil offence. We look forward to the notification of the revised provision by the Government of India.
“With the global environment in high flux, India remains well-poised for staying at the top of the growth ladder. FM’s brilliant policy announcements greatly reassure industry, reiterate the government’s strong partnership approach and build trust between all stakeholders, be it consumers, lenders, officials, or entrepreneurs,” complimented Mr Chandrajit Banerjee, Director General, CII.