Ministry of Finance
Presentation made by Chief Economic Adviser K. Subramanian on measures taken to boost Indian Economy
Posted On: 13 DEC 2019
Smt. Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs, held a press conference on the measures taken to boost economy. Chief Economic Adviser K. Subramanian, gave a presentation on Major Interventions to Boost Economy.
Major Interventions to Boost the Economy
Measures implement a planned economic strategy
Measures to Support Consumption
◊ Support to NBFCs and HFCs to support retail lending:
♦ Total sanctioned support of Rs.4.47 lakh cr includes Rs.1.29 lakh cr for pool-buy-outs of assets
◊ Partial credit guarantee scheme for NBFCs and HFCs
♦ Cabinet approval for SMA-0 borrowers; asset pools rated BBB+ or better;
♦ Within two days,17 proposals amounting to Rs. 7657 Cr. Approved. Proposals amounting to Rs. 20,000 crores to be approved over next two weeks.
◊ Government & PSU dues cleared in two stages: Upto Rs. 61,000 Crores previously
♦ Dues of 32 CPSEs (Navratnas & Maharatnas) cleared by more than 60% in last two months
♦ 21/32 CPSEs have set up “Online Bill Tracking” systems to reduce pendency in bill payment and reduce Accounts Payables of CPSEs permanently; Rs. 4877 Cr. Currently due
◊ Following RBI guidelines mandating banks to link their lending rates to external benchmarks, all PSBs have introduced Repo Rate linked loan products
♦ 8.18 lakh Repo linked loans (Rs. 72,201 Cr.) sanctioned till 27th Nov 2019
◊ MSME Bill Discounting: 5.06 lakh bills (Rs. 12,698 Cr.) till 15th Nov 2019
◊ Transparent One-time Settlement Policy in PSBs: 5.26 lakh (Rs. 16,716 Cr.) sanctioned
Measures to boost Investment
◊ Continuous liberalization has resulted in record FDI inflows: $35 billion in H1 2019-20 as against $31 billion in H1 2018-19
◊ Corporate tax rates cut: 15% tax lowest among peers
♦ Given large market and large labour force, these tax rates make India more attractive than other countries
◊ Capital Expenditure (Capex) by the Government
♦ 66% of budgeted Capex of Rs. 3.38 lakh Cr already undertaken
♦ Indian Railways & Ministry of Road Transport and Highways projected to undertake Capex of Rs. 2.46 lakh Cr by 31.12.2019
♦ Select CPSEs (32 Maharatnas and Navratnas) have undertaken Capex of Rs. 98,000 Cr till Nov 2019. Projected to undertake Capex of Rs. 60,000 Cr in the rest of the year
◊ Approval of a realty fund worth Rs. 25000 crore for stalled housing projects
♦ Fund (SWAMIH) is fully operational and Investment Committee is completing due diligence on the first set of deals today
♦ Necessary changes in IBC to enable the Fund’s operations
♦ Careful due diligence requiring coordination done in record time (6-8 weeks as against 6-8 months usually)
♦ Fund has found excellent traction from 13 domestic financial institutions including HDFC, SBI, LIC. Legal documentation for Rs. 10,530 Cr. already executed
♦ Process has incorporated lessons from previous episodes of careless fiscal expansion
◊ Credit expansion via PSBs: Rs. 60,314 Cr equity infused; Rs. 4.9 lakh cr. Disbursed
♦ Rs. 2.2 lakh Cr to Corporates; Rs. 72,985 Cr to MSMEs and Rs. 39,453 Cr. to retail borrowers
◊ Enable and protect honest decision-making in PSBs
♦ Internal Advisory Committee (IAC) in banks to classify cases as vigilance or no vigilance;
♦ IAC/CVO decision to be final
♦ Advisory Board for Bank Frauds set up
Key Reforms in Capital Markets to enable financing
◊ Law passed by Parliament for setting up unified regulator for International Financial Services.
♦ This will enable capital flows by reducing regulatory and compliance burden.
♦ Bring back trading of Indian financial products from off shore centres.
◊ Regulatory burden for equity/equity-like instruments eased through comprehensive Rules for FEMA Non-Debt Instruments
♦ Will streamline the foreign investment regime
◊ One Unified market across the country for financial instruments through rationalisation of Stamp Duty
♦ Key recommendation of H R Khan Committee to foster Development of Corporate Bond Mkt
◊ A revised ECB Framework has been prescribed to rationalise the scheme of foreign debt access by Indian companies
♦ Includes Working Capital loans and Rupee denominated loans
♦ Will enable capital raising by Indian Corporates for funding investment
◊ A framework for debt ETF has been notified by SEBI
♦ Bharat Bond ETF utilises this framework
◊ A framework to allow shares with Differential voting rights (DVR) enabled
♦ Foster new economy by encouraging start-ups to raise funds from the market without diluting promoters’ interest in the company
◊ Interoperability among clearing corporations has been implemented
♦ Enable efficient use of capital for clients who trade on multiple stock exchanges
◊ Plain vanilla options in Commodities have been enabled for trading on exchanges
♦ Will facilitate hedging of risks in agricultural commodities
◊ Norms applicable for Credit Rating Agencies have been tightened
♦ Will enable further development of credit markets
◊ Know Your Customer (KYC) norms for FPIs: In consultation with the Ministry, SEBI has approved several changes in the KYC norms for FPIs on 5th November 2019
♦ Include simplified documentation requirements and exemptions for regulated entities
◊ Increase in statutory limit for FPI investment in a company from 24% to sectoral foreign investment limit w.e.f. 01.04.2020
◊ On 4th Oct 2019, RBI announced its decision to:
♦ Permit USD-INR trading at GIFT IFSC and
♦ Allow domestic banks to freely offer foreign exchange prices to non-residents at all times
♦ Bring offshore Rupee market to domestic stock exchanges and permit trading of USD -INR derivatives in GIFT IFSC
♦ Thereby enable further development of Forex market
Reforms: Disinvestment to enhance economic efficiency
◊ Disinvestment in non-priority areas where competitive markets have come of age
♦ Enable private buyers to bring capital, technology and better management
♦ Enhance productivity and thereby economic growth
♦ BPCL, CONCOR & SCI
◊ Widening the bandwidth of disinvestment for minority stake sale:-
♦ Govt. equity to be brought down below 51% in select CPSEs on case-to-case basis
♦ This will increase wider public ownership of selected CPSEs
◊ Bharat Bond ETF to enable private participation and wider pool of financing for CPSEs
Measures to improve ‘Ease of Doing Business’
◊ India has jumped to 63rd in World Bank’s EODB rankings; IBC a primary contributor to the same
♦ Ring-fencing successful bidders of stressed assets from the risk of criminal proceedings against offences committed by previous management and promoters
♦ Threshold for financial creditors to prevent triggering of insolvency for small amounts
◊ No need for Debenture Redemption Reserve (DRR) for debentures issued by Listed companies, Banks, NBFCs and HFCs
♦ Will reduce cost of issuance and help in developing the corporate bond market
◊ CSR violations de-criminalized and to be treated as civil offence
◊ NBFCs permitted to use the Aadhaar authenticated bank KYC
Ease of Doing Business: Reform in Labour Laws
◊ Code on Wages 2019 notified in August 2019
♦ Subsumes four acts to transform old and obsolete labour laws into more accountable and transparent ones. Enhances ease of compliance
◊ Code on Occupational Safety, Health and Working Conditions Bill, 2019, introduced in Parliament in July 2019
♦ 13 Central Labour Laws brought in ambit of New Code
◊ Industrial Relations Code, 2019 introduced in Parliament on 28th November 2019
♦ Amalgamates and rationalizes three Central Labour Acts to impart flexibility to the exit provisions (relating to retrenchment etc.)
◊ Social Security Code Bill, 2019 introduced in Parliament on 11th December 2019
♦ Enables universal security of workers
◊ Contribution of ESIC reduced from 6.5 percent to 4.0 percent.
◊ Web-based, Jurisdiction free inspections with report to be uploaded within 48 hrs
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