Despite claims and protests to the contrary, everything’s not alright with the Indian economy. Growth is slowing down, battered by a prolonged consumption slowdown and global headwinds caused by rising protectionism and trade wars. Perhaps recognizing these factors, the Indian government announced a slew of measures this week to shore up Indian startups, MSMEs, and exporters. Finance Minister Nirmala Sitharaman announced several decisions to ease the business environment in the country, including scrapping the ‘angel tax’, expediting GST refunds for MSMEs, as well as pushing for a gain in exports because of the weaker rupee. This pragmatic approach to boosting exports and the wider economy is necessary, especially given former President Pranab Mukherjee’s recent comments asking for exports to contribute a third of India’s $5-trillion economy target. In the same vein, India has also called for harmonization of individual GAP standards amongst SAARC nations to boost agriculture trade in South Asia. With additional incentives in the pipeline for key sectors like cotton yarn and sugar, Indian exports and trade can look to the future positively. One only hopes that the government’s emergency measures will be enough to break the Indian economy’s slowdown.
Trade Update
31ST AUGUST
# 39
The government on 23rd August announced several decisions to ease doing business in India, including scrapping the ‘angel tax’ for registered startups, expediting GST refunds for the MSME sector, as well as setting a time-bound window for the payment of delayed dues by public sector companies. “In order to mitigate genuine difficulties of startups and their investors, it has been decided that the relevant provisions of Section 56 of the Income Tax Act, which is commonly called the ‘angel tax’, shall not be applicable to a startup registered with the Department for Promotion of Industry and Internal Trade,” Finance Minister Nirmala Sitharaman said while addressing a press conference to announce the decisions.
As the rupee hovered around the 72-mark against the dollar, FM Nirmala Sitharaman on 23rd August said a weaker Indian currency augurs well for exports. “The rupee’s volatility or the levels that it has reached will help our exports and that itself would help the economy because exporters can now look forward to reaching greater markets across the world, and this will boost the economy,” the FM said. The rupee gained 15 paise to close at 71.67 against the dollar on 23rd August after it hit an eight-month low of 71.93 on 22nd August.
Former president Pranab Mukherjee on 26th August said exports should constitute one-third of the government’s ambitious US$5-trillion economy aim. Mukherjee also said the ongoing trade war between the US and China should give Indian exporters a chance to increase volumes. “One-third of that (US$5-trillion economy target) must come from international trade...The fight between the two giants (US and China) does give Indian exporters a ray of hope. But, that will be for a short while,” the Bharat Ratna awardee said at a Federation of Indian Export Organisations event.
India on 27th August pitched for harmonisation of individual national standards on Good Agricultural Practices (GAP) among SAARC nations to boost regional trade in South Asia. GAP is a standard that defines appropriate methodology and inputs to be followed by farmers in order to produce safe and high-quality agri-products which are in demand throughout the world. The Indian version of GAP, called INDGAP, is developed and managed by the Quality Council of India (QCI).
No government and no finance minister can afford to forget the ground realities. Reality hits back. It was but natural then that Finance Minister Nirmala Sitharaman had to take note of certain issues in the economy which she did not reckon with in her Budget speech on 5th July. The Budget was meant as a statement of intent, grand intent, of the Prime Minister Narendra Modi government’s second term in office. It was felt that to mention problems in the speech would have spoiled the party, as it were.