Skip to main content

Economists say Govt Steps will Lift Sentiment

Economists feel the government measure to address the current account deficit and rupee depreciation may improve sentiment and were just the limited response that was needed, but some felt they suggest panic on the part of the government. The government on Friday announced a slew of measures to bring additional capital inflows of $8-10 billion to arrest rupee depreciation and address the underlying problem of high current account deficit. “We view the government’s guarded response as appropriate because India’s macro fundamentals are in a much better shape today than in 2013 – higher growth, stable inflation and fiscal commitment - and do not necessitate a knee-jerk reaction,” Sonal Varma of Nomura said in a research note.
Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, was not sure how much capital flow will come from these measures but agreed that no panic reaction was needed. “Though we need to be vigilant of rupee depreciation, there is no need to press the panic button and announce any Big Bang measures because our fundamentals are stronger compared with others,” Bhardwaj added.
India’s former chief statistician Pronab Sen had a different view. “I am puzzled by these measures since they seem to be sending out wrong signals,” Sen said. “First, they give the impression that the government is panicking, which will worry investors and encourage speculators because it is rightly assumed that the government knows much more than the average investor/speculator.” “They will assume that government is worried about something if they want to raise $8-10 billion despite RBI holding $400 billion of forex reserves,” he added.
Permitting manufacturing sector entities to avail ECB up to $50 million with a minimum maturity of one year from the earlier period of three years is another measure economists have issue with. “Though these measures don’t seem to have a longterm impact, the government has tried to incentivise debt creating capital inflows and this does not augur well for the economy in the medium- to long-run,” said Devendra Pant, chief economist at India Ratings. As per Sen, by easing tenor of ECBs to one year from three years, the government has made external borrowings attractive for short-term capital needs, of which there is no dearth in Indian banking sector.

The Economic Time, 17th September 2018

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s