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ET EDIT -Welcome Move to Recharge Economy Turning responsive to industry is half the battle

August 24, 2019 05:38 AM


Welcome Move to Recharge Economy
Turning responsive to industry is half the battle
The most welcome part of Friday’s announcements by finance minister Nirmala Sitharaman is neither the scrapping of the tax on foreign portfolio investors that has driven lots of them out of India nor the proposed upfront recapitalisation of banks but the government’s readiness to abandon an attitude of we-know-it-all and respond to concerns voiced by industry. Industry will appreciate the responsiveness and it would help the economy slough off lethargy.

It is most welcome that the government has rolled back the extra tax burden proposed by the Budget on foreign portfolio investors and scrapped the angel tax on startups. However, it would have been better if the government had scrapped the additional tax burden on income other than capital gains as well. Similarly, instead of exempting a class of companies from the ambit of the angel tax, the angel tax provision should have been removed, now that the ability to track money flows is far superior today than in the past. The finance minister did not specifically mention exports, but faster processing of GST refunds will boost exports, besides removing a huge burden on MSMEs. The mandated listing of MSME invoices on the TReDS was announced before the elections, but remains a work in progress. The government deserves kudos for a slew of measures to prevent harassment of economic agents by taxmen and other regulators by deployment of technology-mediated procedure.

The credit guarantee and enhancement schemes announced, as well as other proposed measures to strengthen the bond market are most welcome. The bond market would gain, also from greater access to hedging currency risk within India and better credit default swaps. The exemption of litigated payments from swifter release of government dues to companies will hold up a large chunk of such payments. The arbitration award-based payment norm should be extended retrospectively to cases under litigation, too — the litigation starts after arbitration. The auto sector does stand to get a boost from public sector purchases of vehicles and clarity on the life of BS-IV vehicles

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