Scribd Logo
Upload

Welcome to Scribd!

  • 31 views

    Measures To Boost Economy

    Uploaded by

    Parmesh Gupta
    The document outlines various recent measures announced by the Indian government to revive the economy. It discusses monetary policy measures like lowering the repo rate and linking floating interest rates to external benchmarks. It also details measures to boost exports like introducing an export incentive scheme and expanding export credit. Measures to boost key sectors like housing, manufacturing and agriculture are also summarized. While these reforms may improve private investment and attract investors, there are challenges like a potential loss of tax revenues and limited targets of some programs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Measures To Boost Economy

    Uploaded by

    Parmesh Gupta
    31 views2 pages
    The document outlines various recent measures announced by the Indian government to revive the economy. It discusses monetary policy measures like lowering the repo rate and linking floating interest rates to external benchmarks. It also details measures to boost exports like introducing an export incentive scheme and expanding export credit. Measures to boost key sectors like housing, manufacturing and agriculture are also summarized. While these reforms may improve private investment and attract investors, there are challenges like a potential loss of tax revenues and limited targets of some programs.

    Original Description:

    Indian Government measures to boost economy in 2019

    Original Title

    Measures to boost economy

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document outlines various recent measures announced by the Indian government to revive the economy. It discusses monetary policy measures like lowering the repo rate and linking floating interest rates to external benchmarks. It also details measures to boost exports like introducing an export incentive scheme and expanding export credit. Measures to boost key sectors like housing, manufacturing and agriculture are also summarized. While these reforms may improve private investment and attract investors, there are challenges like a potential loss of tax revenues and limited targets of some programs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views2 pages

    Measures To Boost Economy

    Uploaded by

    Parmesh Gupta
    The document outlines various recent measures announced by the Indian government to revive the economy. It discusses monetary policy measures like lowering the repo rate and linking floating interest rates to external benchmarks. It also details measures to boost exports like introducing an export incentive scheme and expanding export credit. Measures to boost key sectors like housing, manufacturing and agriculture are also summarized. While these reforms may improve private investment and attract investors, there are challenges like a potential loss of tax revenues and limited targets of some programs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    3.

    ECONOMY
    3.1. MEASURES TO BOOST ECONOMY
    Why in News?
    Recently, various measures were announced to revive the economy.
    Monetary Policy Measures
    Repo rate cut Repo rate has been brought down to 5.4% to spur credit growth
    Monetary Policy • Linking floating rate loans extended to both retail consumers as well as MSMEs to
    Transmission external benchmarks (e.g. repo rates, yield on 3/6 months treasury bill) to improve
    monetary policy transmission
    • A floating interest rate moves up & down with rest of the market or along with an index.
    This contrasts with a fixed interest rate, in which interest rate of a debt obligation stays
    constant for the duration of loan's term.
    Higher flow of funds to RBI relaxed liquidity norms to allow more lending to non-banking finance companies (NBFCs)
    NBFC sector by banks

    Measures to boost exports


    Exports • Scheme for Remission of Duties & Taxes on Export Product to replace Merchandise Exports
    from India Scheme (MEIS) for all goods exported. It will provide more incentives to the
    exporters than existing schemes put together
    • Fully automated electronic refund for exporters
    Exports Finance • Under the expanded Export Credit Insurance Scheme (ECIS), Export Credit Guarantee
    Corporation will offer higher insurance cover to banks lending working capital for exports.
    Govt. will provide ₹1700 cr annually.
    • Priority Sector Lending norms for Export Credit revised to make available to banks an
    additional ₹36,000 cr to ₹68,000 cr for lending to the export sector
    • Effective monitoring of export financing by an inter-ministerial working group under
    Department of Commerce, tracking disbursal of export credit through a public dashboard
    Export Facilitation • Leverage technology to reduce Turn Around Time (TAT) at airports/ports/customs through
    process digitization and elimination of offline/manual services
    • Annual mega shopping festivals to be organized in 4 places across 2020 March in 4 themes
    (G&J, Handicrafts/Yoga/Tourism, Textiles and Leather) on the lines of Dubai
    Free Trade • Special FTA Utilisation Mission to promote awareness of preferential duties among Indian
    Agreements exporters and facilitate compliance requirements (Rules of Origin/Certificate of Origin etc.)
    • Online “Origin Management System” for exporters to enable them to obtain Certificates of
    Origin – CoO (under Rules of Origin) to be launched by Directorate General of Foreign Trade
    (DGFT)
    Engineering • Time bound adoption of mandatory technical standards and their effective enforcement by
    Standards setting up a Working Group on Standards in Department of Commerce
    • Affordable testing and certification infrastructure to be adequately expanded and developed in
    PPP mode to enable exporters to get all internationally accepted tests done within India
    Handicraft Export Enable handicrafts industry to effectively harness e-commerce for exports through mass enrolment
    of handicraft artisans and cooperatives directly on e-commerce portals

    Measures to boost housing sector


    Relaxation of External Relaxation of External Commercial Borrowings (ECB) guidelines for affordable housing to
    Commercial Borrowings facilitate financing of home buyers who are eligible under the Pradhan Mantri Awas Yojana
    (ECB) guidelines
    House Building Advance Lower interest rates on House Building Advance and link it with 10 year G Sec yields
    Special window for Government announced a special ₹20,000 cr fund (₹10,000 cr from Government & roughly
    affordable and middle- ₹10,000 cr from outside investors) as a last-mile funding for completion of ongoing housing
    income housing projects that are not classified as non-performing assets (NPAs) or are facing bankruptcy
    proceedings under NCLT.

    29 www.visionias.in ©Vision IAS


    Measures to boost manufacturing sector
    Lower Corporate Tax • An amendment in Income Tax Act 1961 to give any domestic company an option to pay
    income-tax at the rate of 22% subject to condition that they will not avail any
    exemption/incentive
    • Effective corporate tax rate for such companies shall be 25.17% and they will not be
    required to pay Minimum Alternate Tax (MAT)
    Boost Make in India A new provision inserted in Income Tax Act’1961 allows any new domestic company,
    incorporated on or after 1st October 2019 & making fresh investment in manufacturing, an
    option to pay income-tax at the rate of 15%.
    Expand the scope of CSR Currently, 2% of the CSR fund can be spent on incubators, funded by Central/State
    funding Governments or PSUs and making contributions to public funded universities, IITs, National
    Laboratories and autonomous bodies engaged in conducting research in science,
    technology, engineering and medicine aimed at promoting SDGs.
    Impact of the reforms
    • Improve private investment: Tax cuts, by putting more money in the hands of the private sector, can offer
    people more incentive to produce and contribute to the economy, which, in turn, will create employment.
    • Helps to attract investors: A cut in corporate taxation rate will India at parity with East Asian economies and
    will make India more competitive on the global stage
    • Boost consumer demand: With lower tax rates in place, the firms may cut prices in order to attract
    consumers, which in turn will boost consumer demand
    • Increase in fiscal capacity: The reforms have the potential to revive the economy, help boost tax collections
    and compensate for the loss of revenue.
    Challenges associated
    • Tax cut is expected to cause a yearly revenue loss of ₹1.45 lakh crore to the government which is struggling
    to meet its fiscal deficit target.
    • Income tax cut should be preferred as it would leave consumers with more disposable income and boost
    consumption demand. Although, the impact of an income tax cut would be limited as the number of tax
    payers in the country are few.
    • To ensure operational profitability while making lending rates cuts, banks may start cutting the interest rate
    they pay to deposit holders. This might push the depositors towards non-liquid investments such as gold,
    real estate etc.
    • Limited target: The proposed special fund for housing sector, primarily targeted at affordable & mid-level
    housing projects that are 60% complete, has left out majority of the pending projects.
    • Tax issues: Recent measures don’t address the key demands of developers such as tax rebate and lower
    interest rate for home buyers and developers.
    • Global scenario: An uncertain oil market could negate any impact in the short term. India imports 80% of its
    oil requirement and an increase in crude prices may put further pressure on the ₹, which has dropped 2% in
    the past three months.
    For more information on Economic slowdown, refer VISIONIAS August 2019 Current Affairs.

    3.2. AGRICULTURAL CREDIT


    Why in news?
    Recently, the report of the internal working group to review the agricultural credit was released by RBI.
    Agricultural Finance in India – A brief history
    • Phase 1 (1951-69):
    o Thrust on developing primary sector since 1st FYP in 1951.
    o National Credit Council in 1968 emphasized that commercial banks must increase financing to small scale industries
    and agriculture
    o Nationalization of banks in 1969 put thrust on opening of rural/semi-urban bank branches
    • Phase 2 (1970-1990)
    o The decade of 1970s marked the entry of commercial banks into agricultural credit with Lead Bank Scheme and
    regulatory prescription of Priority Sector Lending (PSL).

    30 www.visionias.in ©Vision IAS

    You might also like