Nirmala Sitharaman’s stimulus plan falls short on vision

GS-III: Nirmala Sitharaman’s stimulus plan falls short of vision

Context

Indian economy is slowing down. In this context, the Finance Minister offered a stimulus package.

What does it offer?

It rolled back the tax surcharge on overseas investors imposed in the budget.
The angel tax on startups has been removed.
The government will buy more cars for its fleet.
Injection of 700 billion rupees of additional capital into state-run banks.Analysis
It gives global banks a break on derivatives they trade in India while denying the same tax benefit to local hedge funds. This can be called unfair discrimination against a nascent industry in domestic alternative assets in India.
Govt buying cars may arrest the slide in the industry, where July sales slumped 36%. Vehicles purchased now won’t become illegal when stricter pollution standards kick in next year. This can help deal with inventory build up.
Banks are yet to absorb the 2.4 trillion rupees of bad debt accumulated in just 16 companies.
Half of that reflects loans to troubled shadow banks, according to Credit Suisse Group AG.
A parallel move by RBI to link loan rates to its policy benchmark is laudable.

CONCLUSION

Allowing larger firms to flourish, enabling smaller firms to secure cheap financing and forcing the state to retreat from the business will benefit the private sector in the long run.

Source: Live Mint

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