However, India will still be the fastest-growing major economy of the world and much ahead of China, said IMF
India’s economic growth is “much weaker” than expected, the IMF said, attributing the reasons for corporate and environmental regulatory uncertainty and lingering weaknesses in some non-bank financial companies.
The International Monetary Fund (IMF) in July projected a slower growth rate for India in 2019 and 2020, a downward revision of 0.3% for both the years, saying its GDP will now grow respectively at the rate of 7% and 7.2% reflecting a weaker-than-expected outlook for domestic demand.
However, India will still be the fastest-growing major economy of the world and much ahead of China, the Washington-based global financial institution had said.
Government stimulus package to reboot slowing economy
A government-backed stimulus package is to be introduced as part of moves to tackle the country’s economic slowdown. Among the measures to be adopted, five are seen as having particular significance:
Cancellation of Enhanced Tax Surcharge on Equity Share Transfer Profit
The enhanced tax surcharge on long- and short-term capital gains arising from the transfer of equity shares, applicable to both Foreign Portfolio Investors (FPIs) and domestic investors, is to be abolished. The is intended to stem the outflow of capital that has negatively affected both the country’s stock market and currency exchange rates.
Postponing New Vehicle Registration Fee Increase
The planned hike in the one-time registration fee for new vehicles is to be delayed to June 2020. It is hoped that this will boost demand in country’s automotive sector following its 36% sales slump in July this year. It is expected to drive a higher level of auto-parts sales.
Cash infusion for State-Owned Banks
State-owned banks are to benefit from a cash injection of INR 700 billion (US$10.14 billion). into the country’s state-owned banks. This follows concerns that bad debts and non-performing assets have reduced the lending capacity of such institution. In addition, the private sector is to be encouraged to step up its level of investments in a bid to introduce fresh liquidity to the market.
Cancellation of Start-Up ‘Angel Tax’
Previously considered taxable, the funds received by start-ups in excess of the fair market value of their shares are now exempt from any levy.
Implementation of Randomised Online Tax Return Review System
While moves to reduce incidences of corruption by removing any direct contact between tax payers and adjudicating officials via a randomised online tax return review system had already been announced, the government has now reconfirmed its commitment to the policy.