FM Nirmala Sitharaman's measures: Govt is finally listening, say experts
Surcharge on FPI withdrawn; immediate Rs 70,000 crore recapitalisation for public sector banks among key announcements
Image: Nguyen Huy Kham / ReutersThe government on Friday evening announced a slew of measures in a direct move to allay concerns which corporate India and financial market investors might have relating to a slowing pace of growth and weakening consumption over the past few quarters.
The biggest takeaway of Finance Minister Nirmala Sitharaman’s press conference was that the government is finally listening. It will put to rest two concerns which Indian businesses and investors were having: That the government did not trust business and that the government has no specific game plan to tackle the domestic economic slowdown.
The fact that a specific economic stimulus was not announced—which would have put more pressure on the fiscal deficit—might actually be a positive at this stage, experts said.
Sitharaman said the government has decided to withdraw the controversial tax surcharge on the Foreign Portfolio Investment (FPIs) announced in the Budget last month. It has also decided to remove the enhanced surcharge levied on long-term and short-term capital gains, which was announced earlier. Both these moves will be seen as a sentiment booster for the stock markets when they open on Monday. Major benchmark indices are ruling at six-month lows.
India is witnessing its slowest growth in the past five years—with GDP growth of 5.8 percent in the fourth quarter of FY19, from 6.6 percent in the previous quarter. The RBI has—in a move to spur demand—cut interest rates by lowering the repo rate by 110 basis points in four successive monetary policy meetings between December 2018 and August this year.
Foreign portfolio investors were net sellers in July for Rs 12,419 crore in equities—their highest level since October 2018—according to data from the National Securities Depository Ltd (NSDL).
