Quick fix to march towards 5 Trillion Economy

Some Reactions Post Budget 2019




"I do not think the budget is growth-oriented. The stock market has also come down considerably.' Adi Godrej"


"If we don't create jobs for our children, we are going to have social problems...We are only doing populism. We need to get into real action but I heard none of these things in the Budget. I only heard things which were pleasing and will make headlines."Arun Nanda, Mahindra Holidays


"Was hoping the first full-time FM of the country would "hit some boundaries" but she chose to take "steady singles" instead. Mahindra & Mahindra Chairman said despite expectations of big moves to unleash the animal spirit of the economy, the Modi government's budget focussed on a long-term vision." Anand Mahindra

Above are few reactions to budget 2019. which disappointed most sections of society.

At a time when economy needed booster shot and some stimulus to revive consumption, FM gave a 10  year road map. 

Nothing wrong with the same. But currently economy is in dangerous downward spiral. every sector is interconnected, Auto Industry slow down affects ancillary industries, textiles,  jobs

Real Estate affects all from cement to steel to as simple as home consumption goods

However the budget failed to address the near term issues. Currently most corporate post results talk of cutting growth targets and income. Sentiment is of  doom and gloom, with everyone hoping, every passing day of some government intervention 

The solutions


***The proposal to increase the minimum public shareholding in listed firms to 35 per cent from 25 per cent, if implemented, may potentially squeeze liquidity in the secondary market, as many multinational companies and firms with high promoter holdings will have to come out with FPOs, QIPs or other tools to reduce stakes

At current market prices, the total quantum of sale that needs to be done by these 1,174 companies works out to be a whopping Rs 3,87,000 crore

The aspect needs to be re looked 

Buyback tax of 20% on listed companies:

 Finance Minister Nirmala Sitharaman proposed to extend the buyback tax at 20 percent to listed companies as well. This means, shareholder of a listed company will no longer enjoy exemption on income arising on account of buyback of shares.  Adding to the woes, a listed company will now have to pay tax on buyback under section 115QA at the rate of 20 per cent plus applicable surcharge and cess. The move is likely to impact buyback by all listed companies in future.

Kindly re look the same

LTCG ON EQUITY AND SURCHARGE

Since the day long term capital gain on equity was introduced in 2018 budget markets never got into bullish trend. I doubt if government made any money out of the same, but in this process many small investors, retailers lost money. To add to the woes current budget added surcharge.

The government is in some different world that FII only have India to invest. Why shall they invest in Indian capital markets, when many other emerging markets are as promising and have much lower taxes.

To collect a small amount of  surcharge, more than 6 lac crore market capitalization lost. I fail to understand why the government in clinging to a tax, which is not generating  any revenues.

For many, their money is trapped in markets and in losses. They have postponed their purchases, and in turn the consumption hits. 

For few, it is easy to say that capital markets do not reflect the state of economy. 

Revenues are generated bu government out of capital markets 

 STT collection for the fiscal year stood at Rs 111.23 billion, Stock market traders and financial advisers create jobs. They pay taxed to government for profits earned. But this budget chose to ignore the same and concentrate on meager amount of tax. Very soon traders will close down. advisers will shut shops and along with that jobs lost. 

Not to forget, how disinvestment targets shall be met by the government with this state of capital markets 

JUST ONE STATEMENT, THAT WE ABOLISH LTCG ON EQUITY, WILL SEND A STRONG MESSAGE, THAT THIS GOVERNMENT CARES FOR STAKE HOLDERS AND IS WILLING TO ACT AS TIME DEMANDS

REDUCTION OF CORPORATE AND INDIVIDUAL TAXES

High tax rates always promote evasion. Low taxes for corporate and incentive to them for fresh investments and job creation shall immediately boost sentiment 

In fact increasing the slab from 5 lacs to 8 lacs for individuals, shall give more money in their hands to boost consumption and add to spending 

AUTO SECTOR


Auto sector includes not only cars but tractors and commercial vehicles too. It creates jobs for millions. Also associated are many more industries to same. Move to EV as in budget 2019 is a welcome move. However transition shall take time. Auto sector is in deep recession, with dealers shutting shops and millions losing jobs


Reduction of GST rates for few months, giving GST input credit in your tax returns for cars bought in exchange of 15 year old cars, Giving depreciation deduction to salaried class for car bought, ............and various other measures can be taken to improve sales


FOREIGN CURRENCY BONDS FOR MONEY STASHED ABROAD

The idea of Sovereign bonds as presented in budget, has been met with criticism, that the same shall be dangerous for country in future.

Money stacked abroad shall take a long time to be brought back to India. Even if the names are available, it shall meet legal hurdles. To help fiscal deficit and give booster shot to eceonomy, our country needs money

Issue Masala bonds for money undisclosed money abraod at zero perecent coupon rates. Also with a caveat , that money shall be paid back in India, in Indian currency posy five years at fixed exchange rate.  The same shall not put governemnt at currency risk, no interest payments, and shall give huge resorces to exchequer

One might argue that such VRS have not been successful previously. But now scenario has changed. All account holders are running for cover. They shall take the offer with both hands, provided they are promised amnesty. 

However fear psychosis needs to be created. If any account holder is caught post  this offer, life time imprisonment is on cards 

Currently the sentiment in economy is that government is anti Rich, Anti industrialists, Anti middle class.

It is a great step to lift poor out of poverty, but to punish all who are rich is not the right path. Socialism has never benefited any country. Rather than offering freebies, jobs need to be created. The same cannot happen, if businesses are taxed to maximum extent. 

We need a tax friendly environment for Indian corporate as well as to attract foreign money by way of FDI. Somehow the budget has given an impression, that India is on path to socialism, that might affect foreign investments

With US reducing interest rates and EU announcing Quantitative Easing, we have closed the doors to money that would have chased our equity markets. Something urgent needs to be done, before this money finds it way to China and other Emerging markets