My biggest takeaway from Finance Minister Nirmala Sitharaman’s press meet on Friday was that the BJP government was finally prepared to accept the ground reality and willing to take corrective action. More importantly, the entrepreneurs and tax payers are seen as “wealth creators” and not “villains”, trying to game the system. The announcements were, no doubt, a sentiment booster without a strain on the exchequer, which I think is a fine balancing act.
Although the finance minister divided her speech into six silos and announced 32 measures, I would divide her action into three silos. First, there was an effort to assuage fear among tax payers, industry and bankers. Second, an effort to release liquidity into the system and third, and most important, direct sentiment boosters with rollbacks and demand revival plans.
Entrepreneurship thrives only when there are opportunities, an environment without fear (as long as you are operating within the boundaries of law), and availability of finance. India has been a land of opportunity for those with entrepreneurial zeal, however, some factors were killing the spirit slowly, but steadily. Tax terrorism, a lack of liquidity and strain on working capital due to non-receipt of government dues were the top woes of the industry, especially the MSMEs. The release of Rs 70,000 crore for public sector bank (PSB) recapitalisation, transmission of rate cuts by banks and process driven “one-time settlement” for MSMEs will hopefully get a number of them back on the path of progress. The faceless assessment and increased transparency would surely be a step towards lesser harassment. The refund of GST within 30 days and clearing off the pending payments due from the government, as well as CPSEs will provide the much needed working capital to the sector. NHB’s Rs 30,000 crore additional liquidity support to HFC will ease some woes of the real estate sector.
The reversal of enhanced surcharge on equity capital gains for foreign and domestic investors was the most anticipated rollback and this should be a sentiment booster. The auto sector, which is considered a driver of any economy, was expecting sops in terms of GST moderation. Instead, the finance minister provided incentives to boost demand by doubling the depreciation benefit, which was smart thinking. Additionally, the nudge for government departments to replace the ageing fleet could help start the demand cycle.
Although the announcement by the finance minister is not a remedy for all the economic woes, it signals a step in the right direction by a government, which is now willing to listen and course-correct.
Apart from Nirmala Sitharaman’s positive press meet, the day also saw US President Donald Trump’s tweet urging American businesses to shift their production out of China, resulting in the Dow Jones (DJIA) plunging more than 2 per cent on Friday. While this can dampen the positive sentiment in Indian markets, I believe there is a silver lining, if follow thorough action is initiated by the US. Even if a small number of the manufacturing facilities moving out of China find the Indian environment conducive, it could change our economic landscape. The government needs to be pro-active to ensure that we capitalise on this huge ‘Make in India’ opportunity taking us to the next level.
Ambareesh Baliga is an independent market analyst. Views expressed are his own
Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.