{"id":51809,"date":"2019-09-03T19:00:04","date_gmt":"2019-09-03T13:30:04","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=51809"},"modified":"2019-09-03T17:48:30","modified_gmt":"2019-09-03T12:18:30","slug":"7-pm-centre-must-loosen-purse-strings-3rd-september-2019","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-centre-must-loosen-purse-strings-3rd-september-2019\/","title":{"rendered":"7 PM | Centre must loosen purse strings| 3rd September, 2019"},"content":{"rendered":"\n<p><strong>Context:<\/strong> present\nslowdown of economy<\/p>\n\n\n\n<p><strong>More in news:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Asia&#8217;s third largest\neconomy expanded just 5.0% year on year, official data showed on Friday, far\nbelow the 5.7% forecast in a Reuters poll of economists<\/li><li>Auto industry body SIAM on Monday sought\nimmediate steps from the government, as sales continued to plummet with\npassenger vehicle makers witnessing a decline of 30 per cent off take in\nAugust&nbsp;<\/li><\/ul>\n\n\n\n<p><strong>Reasons\nfor economic slowdown:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Jolt of reforms:<\/strong> demonetisation happened in November 2016, dealing a severe blow to\nconsumption, leading to a vicious cycle of job loss and lower income, which led\nto further drop in demand.<\/li><li><strong>Goods and Service Tax (GST) introduction:<\/strong> next shock came in the form of a reform-when GST was\nrolled out in July 2017. This had a knock-on effect on exports growth in the\nyear of implementation because of delay in refunds to exporters<\/li><li><strong>Tight fiscal and monetary policies:<\/strong> the combined fiscal deficit of the centre and states\nis very high. And the government committed to lowering its fiscal deficit, it\nleft little room for government to increase its spending to pump up the\neconomy.<\/li><li>And monetary\npolicy was focussed on inflation control, which ensured interest rates remained\nhard.<\/li><li><strong>Bank NPAs:<\/strong> most\nPublic Sector Banks are saddled with high Non Performing Assets that have\nresulted in them tightening lending and instead, seeking deposits and otherwise\nrepairing their balance sheets by making provisions for Bad Loans.<\/li><li><strong>Absent\nrecapitalization:<\/strong> of such banks by the government, one\nmight very well see a vicious cycle wherein bad debts and demand collapse lead\nto no lending and no fresh investment in addition to any consumption.<\/li><li><strong>Global slowdown:<\/strong> the most important factor is that there is also a global\neconomic slowdown that is happening and given the fact that India is a net\ncommodity exporter, there has been a slump in the volumes of exports.<\/li><li>With the\nUS-China trade war, global sentiments have remained poor, making the prospects\nof an export led growth bleak. Add to that, a looming Brexit.<\/li><li><strong>Farming crisis:<\/strong> Non-food inflation continued to surpass food inflation in the past two\nyears, amounting to income transfers from rural to urban areas.<\/li><li><strong>Retreat of globalization:<\/strong> Apart from that, the global slowdown has also\nbeen accompanied by a retreat of globalization which has resulted in FDI or\nForeign Direct Investment being only in the areas of speculative finance and\ndistressed assets purchases rather than into investments that help the Real\nEconomy.<\/li><li><strong>Structural transformation:<\/strong> the slowdown is also part of a longer-term\nstructural shift wherein the Economy is shifting gears from the high investment\nera to a low investment era as well as a transition from being cash-driven\neconomy to a digitally enabled economy.<\/li><\/ul>\n\n\n\n<p><strong>Measures taken by the government to improve the\nslowdown:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Tax Incentives: <\/strong>The Central Board of Direct Taxes (the CBDT) has provided in a\nrecently issued notification, that an investment fund set up by a Category-I or\nCategory-II Foreign Portfolio Investor (FPI) registered with the Securities and\nExchange Board of India (the SEBI) need not satisfy the investor\ndiversification conditions stated in the ITL to qualify as an EIF. <\/li><li>Additionally, the CBDT\nhas specified the list of countries in which the investment fund should be\nestablished, incorporated or registered to be eligible for benefits under the\nsafe harbor regime.<\/li><li><strong>Recapitalization:<\/strong>\nThe government on Friday announced a fresh capital infusion of about $10\nbillion (Rs.&nbsp;70,000crore) into debt-burdened\nstate banks and credit guarantees to support shadow lenders in a bid to boost\nlending and revive the economy.<\/li><li><strong>SME payments:<\/strong> SME payments are to be streamlined with a one-time settlement\nplan in place and the government is to ensure that it makes its payments on time\nfor projects (over Rs 40,000crore is stuck in the pipeline).<\/li><li><strong>Sectoral measures:<\/strong> The auto sector is to get some relief on\ndepreciation on vehicles and the government has clarified on the validity of\nregistration on Bharat IV vehicles, the government will now be buying new\nvehicles, which was barred earlier.<\/li><li><strong>FDI measures:<\/strong> The FDI rules now give single brand more\nbreathing space in terms of local procurement and setting up of physical\nstructures. Also, 100 per cent FDI through the automatic route in coal mining\nand related activities has been permitted.<\/li><li>As has 26\nper cent FDI under the government route for uploading\/ streaming of news and\ncurrent affairs in digital media. However, these rules take time to work out\nand one does not expect to see a flurry of capital flows.<\/li><li><strong>Mergers:<\/strong> in the\nbiggest consolidation exercise in the banking space, the government announced\nfour major mergers of public sector banks, bringing down their total number\nfrom 27 to 12, a move aimed at making state-owned lenders global sized banks<\/li><li>The\nmerger of PSBs will unlock new potential. Big banks with their national\npresence and global reach will have larger credit appetite and ability to\nmeasure risk.<\/li><\/ul>\n\n\n\n<p><strong>Way forward: <\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>What is\ndefinitely missing from the policies announced so far is a direct stimulus in\nterms of financial outlays from the Centre. This is critical, as the problem is\ndeep on the demand side. <\/li><li>Making\n\u201cdoing business\u201d easier is a positive, and creating mega PSBs a progressive\nstep. But this cannot change the 5 per cent growth number immediately. Money\nhas to be spent and a fiscal compromise is required. Or else, we will continue\nto walk the path of gradual upward movement.<\/li><\/ul>\n\n\n\n<p>Source: <a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/rbi-fundtransfer-india-gdp-growth-economy-modi-government-5960059\/\">https:\/\/indianexpress.com\/article\/opinion\/columns\/rbi-fundtransfer-india-gdp-growth-economy-modi-government-5960059\/<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: present slowdown of economy More in news: Asia&#8217;s third largest economy expanded just 5.0% year on year, official data showed on Friday, far below the 5.7% forecast in a Reuters poll of economists Auto industry body SIAM on Monday sought immediate steps from the government, as sales continued to plummet with passenger vehicle makers&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-centre-must-loosen-purse-strings-3rd-september-2019\/\">Continue reading <span class=\"screen-reader-text\">7 PM | Centre must loosen purse strings| 3rd September, 2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":49370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,9],"tags":[],"class_list":["post-51809","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-7-pm","category-public","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2019\/07\/7-PM.png?fit=1000%2C500&ssl=1","views":{"total":0,"cached_at":"","cached_date":1704763865},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/51809","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=51809"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/51809\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/49370"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=51809"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=51809"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=51809"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}