By Dr. P. Sekhar
Chairman, Global Smart Cities Panel & Micro Tech Global Foundation
Economic growth is an increase in the production of goods and services over a specific period. Economic growth creates more profit for businesses. As a result, stock prices rise. That gives the company’s capital to invest and hire more employees. As more jobs are created, incomes rise. Consumers have more money to buy additional products and services. Purchases drive higher economic growth. For this reason, all countries want positive economic growth.
One man’s spending is, after all, another man’s income, and the income can be spent again. So, the cycle is supposed to work and add to the economic activity and the GDP. It is this activity that has been slowing down in India, since the beginning of 2019. The GDP growth from January to March 2019 slowed down to 5.8%. From April to June 2019, car sales fell by 23.3% in comparison to the same period in 2018. The government wants to stimulate economic growth with expansive policies that are given below.
Facilitating Wealth creators
- CSR Violations: Note to be treated as a criminal offense and would instead be civil liability. Ministry of Corporate Affairs to review the sections under the Companies Act. The government has provided companies with revised orders, time for completing ongoing projects towards fulfilling their CSR obligations.
- Issue of IT orders, notices, summons, letter, etc. through a centralized system: To address complaints of harassment on account of the issue of notices, summons, orders, etc. by certain income – tax authorities:
- On or after 1st October 2019 all notices, summons, orders, etc. by the income – tax authorities shall be issued through a centralized computer system and will contain a computer – generated unique Document Identification Number.
- Any communication issued without computer-generated Unique Document Identification Number shall be non-est. in law.
- All old notices to be decided by 1st October 2019 or uploaded again through the system.
- From 1st October 2019 all notices to be disposed of within three months from the date of reply.
- Relied from enhanced surcharge on Long – term / Short – term Capital Gains: In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No. 2) Act, 2019 on long/short term capital gains arising from transfer of equity shares/units referred in section 111A and 112A respectively.
- Withdrawal of Angel Tax provisions for Startups and their investors:
- To mitigate the genuine difficulties of startups and their investors, it has been decided that section 56(2)(Viib) of the income – tax Act shall not apply to a startup registered with DPIIT.
- It has also been decided to set up a dedicated cell under Member of CBDT for addressing the problems of startups. A startup having any income – tax issue can approach the cell for quick resolution of the same.
Banks / NBFCs / MSMEs
- Additional Credit expansion through PSBs:
- Upfront release of INR. 70,000 Cr., additional lending and liquidity to the tune of ≈ INR. 5 lakh crore by providing upfront Capital to PSBs
- This will benefit Corporates, Retail borrowers, MSMEs, small traders, etc.
- Banks to effect timely rate cuts: Banks have decided to pass on rate cuts through MCLR reduction to benefit all borrowers.
- Banks to launch Repo rate / external Benchmark linked loan products: Reduced EMI for housing loans, vehicles and other retail loans by directly linking Repo rate to interest rates. Working capital loans for the industry will also become cheaper.
- Customer Ease:
- To reduce harassment and bring in greater efficiency, PSBs to ensure the mandated return of loan documents within 15 days of loan closure.
- Benefit: Borrowers who have mortgaged assets.
- Customer Ease: Online tracking of Loan applications:
- On line tracking of loan applications by customers of Retail, MSME, Housing, Vehicle, working Capital, limit enhancements, renewals, etc.
- It would increase transparency, reduce harassment, and improve turnaround time for customers.
- Transparent One Time Settlement (OTS) Policy:
- Banks to issue improved transparent OTS policy to benefit MSME and retail borrowers in settling they’re overdue.
- Policy to be based on a checkbox approach
- Benefit: increased transparency.
- Protecting honest decision making:
- To support decision making and to prevent harassment for genuine commercial decisions by bankers, CVC has issued directions that internal Advisory Committee (IAC) in banks to classify cases as vigilance and no – vigilance.
- The decision of the IAC and bank CVO / DA to be treated as final.
- Support to NBFCs / HFCs: More credit support for the purchase of houses, vehicles, consumer goods,
- Additional liquidity support to HFCs INR. 20,000 crore by NHB thereby increasing it to INR. 30,000 crore;
- Partial Credit Guarantee scheme for purchase of pooled assets of NBFCs / HFCs up to INR. 1 lakh crore to be monitored at the highest level in each bank.
- Prepayment notices issued to NBFCs to be monitored by Banks.
- Use of Bank KYCs by NBFCs:
- NBFCs to be permitted to use the Aadhaar authenticated bank KYC to avoid repeated processes.
- Necessary changes shall be made in PMLA rules and Aadhaar Regulations
- Easier, fast-tracked onboarding of customers.
- Co – origination of loans by PSBs jointly with NBFCs:
- To take advantage of liquidity with PSBs and last-mile customer connect of NBFCs, PSBs to fast track collaboration for loans to MSMEs, small traders Self Help Groups, MFI clients borrowers in Co – origination mode with NBFCs
- GST Refund to MSME within 30 days:
- All pending GST refunds due to MSMEs shall be paid within 30 days. In the future, all GST refunds shall be paid within 60 days from the date of application.
- MSME Bill discounting:
- TReDS to use the GSTN system in the medium term to enhance the market for bill discounting for MSMEs.
- MSME Definition:
- Amendment to MSME Act to move towards a single definition to be considered.
- UK Sinha Committee recommendations:
- Decisions on recommendations such as on ease of credit, marketing, technology, delayed payments, etc. within 30 days.
Increasing Capital flows and Energizing Financial Markets
- Deepening of bond markets in India
- In order to improve access to long term finance, it is proposed to establish an organization to provide Credit Enhancement for infrastructure and housing projects. This would enhance the debt flow towards such projects.
- The government would soon take further action on the development of Credit Default Swap markets soon, in consultation with RBI and SEBI.
- In order to improve the domestic market in bonds, the Ministry of Finance will work with RBI to make it more conducive for investors and bond issuers, as well as facilitate increased trading for price discovery.
- The government has amended the Companies (Share Capital and Debenture rules) 2014 to remove the requirement for the creation of a Debenture Redemption Reserve (DRR) of outstanding debentures in respect of listed companies’ NBFCs and for HFCs.
- Access of Indian Companies to the Global Markets:
- The Depository Receipt Scheme 2014 is expected to be operationalized soon by SEBI. This will give Indian companies increased access to foreign funds through ADR / GDR.
- Use of Aadhaar based KYC for domestic retail investors
- In order to improve market access for the domestic retail investors, Aadhaar –based KYC to be permitted for the opening of Demat account and making an investment in mutual funds.
- Necessary notification for amendments in PMLA Rules to be issued.
- Simplified KYC for foreign and investors and FPIs
- Simplified KYC procedure to improve market access for foreign investors including FPIs.
- Offshore Rupee market
- To bring offshore Rupee market to domestic stock exchanges and permit trading of US$─INR derivatives in GIFT IFSC, the Ministry of Finance is working with RBI to introduce this measure shortly.
- Delayed Payments
- Delayed payments from Government / CPSEs to be monitored by the Department of Expenditure and performance reviewed by the Cabinet Secretariat.
- The decision to pay 75% of the arbitration awards
- In contractual disputes by Government / CPSEs to be implemented and monitored by Cabinet Secretariat.
- INR. 100 lakh crores for developing modern infrastructure over 5 years
- An inter-ministerial Taskforce is being formed by the Department of Economic Affairs to finalize the pipeline of infrastructure projects.
- The above initiative is expected to boost the growth and creation of jobs. These projects would be monitored actively to accelerate capital expenditure and investments in the economy.
- BS IV Vehicles purchased till 31.3.20
- To remain operational for the entire period of registration
- Revision of one-time registration fees
- Being deferred until June 2020.
- Higher depreciation for all vehicles
- Additional 15% depreciation on all vehicles, to increase it to 30% acquired during the period from now till 31.03.20.
- Both EVs and ICVs will continue to be registered
- The government’s focus will be on setting up of infrastructure for the development of ancillaries/components including batteries for export.
- To boost demand
- The government shall lift the ban on the purchase of new vehicles for replacing all old vehicles by Departments
- The government will consider various measures including scrappage policy.
New policies and regulations were implemented in the years to follow that all key sectors’ growth. India, a land of the wonderful diversity and interesting opportunities, remains high on the list of investment destinations by international investors and businesses. With a lot of positives – a large, educated English speaking population, stable government in the center, rising forex reserves, high-value capital markets – India seems to be on a firm growth path with the expectation of a double-digit growth rate.
Economic growth is measured by an increase in the gross domestic product (GDP), which is defined as the combined value of all goods and services produced within a country in a year. Many forces contribute to economic growth. However, there is no single factor that consistently spurs the perfect or ideal amount of growth needed for an economy. In developing countries, economic growth is driven oftentimes by consumer spending and business investment. If consumers are buying homes, for example, home builders, contractors, and construction workers will experience economic growth. Businesses also drive the economy when they hire workers, raise wages, and invest in growing their business. A company that buys a new manufacturing plant or invests in new technologies creates jobs, spending, which leads to growth in the economy.
Other factors help promote consumer and business spending and prosperity. Banks, for example, lend money to companies and consumers. As businesses have access to credit, they might finance a new production facility, buy a new fleet of trucks, or start a new product line or service. The spending and business investments, in turn, have positive effects on the companies involved. However, the growth also extends to those doing business with the companies, including in the above example, the bank employees and the truck manufacturer.
Infrastructure spending occurs when a local, state and central government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. Infrastructure includes roads, bridges, ports, and sewer systems. Economists who favor infrastructure spending as an economic catalyst argue that having top-notch infrastructure increases productivity by enabling businesses to operate as efficiently as possible. For example, when roads and bridges are abundant and in working order, trucks spend less time sitting in traffic, and they don’t have to take circuitous routes to traverse waterways.
Additionally, infrastructure spending creates jobs as workers must be hired to complete the green-lighted projects. It is also capable of spawning new economic growth. For example, the construction of a new highway might lead to other investments such as gas stations and retail stores opening to cater to motorists.
The Government of India launched the Smart Cities Mission in 2015 with the objective of developing sustainable and inclusive citizen friendly cities that enhance the quality of life of its citizens. Instead of only developing Greenfield cities, the focus of the Smart Cities Mission is to invest in the infrastructure and development of Tier 1 and Tier 2 cities and bring them at par with global smart cities. However, it is pertinent to note that there is no strict definition of “Smart Cities” and it appears that each nation has its own necessity and focus on what constitutes a Smart City. Under the Smart Cities Mission, the key objective and aim of a Smart City are to drive economic growth and improve the quality of life of people. A number of foreign governments and international organizations have also offered to provide technical assistance towards the development of Smart Cities. The Government of India has been working together with them to fulfill the objectives of the Smart Cities Mission.
The Smart Cities Mission is a bold initiative of the Government of India with a step taken towards the development of a new India. The initiative towards the development of Smart Cities has been taken in order to achieve comprehensive development which will improve quality of life, create employment and enhance income for all local, leading to inclusive cities. The majority of the Smart city investments could be made by the private entities or foreign investors which would definitely require huge bank funding. The government could grant additional FSI to the private stakeholders for other projects in the same zone giving way to smooth flow of funds. “Value and Valuation of the allied projects will make it a self-sustaining mechanism while bringing unprecedented growth and development for the region.” This valuation of infrastructure growth should be channelized towards infrastructure development to reduce inequalities.
As India continues to ascend in the rankings of the world’s largest economies, its contribution to global GDP growth momentum will also increase. India will also play an increasingly important role as one of the Asia-Pacific region’s major economic growth engines, helping to drive Asian regional trade and investment flows. This reflects the considerable efforts made during the Indian Government’s first term of office to try to reduce the regulatory burden of the Indian national and state bureaucracies on Indian businesses.