Indian Economy: Wrapping Up 2019
2019 was a very vulnerable year for the Indian economy. The already plunging growth in the economy, fell further causing a lot of uproar amongst the citizens. Several failures on part of the Government and incapability of making the existing policies work have led to this condition. This year will surely be remembered in the history of Indian economy mainly for reasons that are not very good. So, as this year ends, it becomes imperative to see what changes the end of the decade brought into the Indian Economy.
By Harshit Gupta | 10 min Read
The first change in the year was the appointment of Nirmala Sitharaman as the Finance Minister after the re election of the NDA in the Government. In the three quarters, the GDP growth rate of the country slipped from 7.3 percent in January 2019 to 4.5 percent in September 2019. Throughout the year, nothing seemed to work for the Indian economy with the drop in the growth rates and other economic problems increasing rapidly. The crisis in the auto to retail sector concerned every citizen of the country, Sitharaman, however kept her feet intact in the slipping financial mud. Nirmala Sitharaman announced measures to boost Indian Economy amid slowdown, rolls back surcharge on FPIs, removes Angel Tax on start-ups amongst some reforms. Ranging from decisions like decreasing cess for foreign portfolio investors (FPI) to merging 27 banks into 12, Sitharaman had taken harsh steps which could possibly help bring back the trailing economy on track again. Though little improvements have been achieved as of yet, the Union Finance Ministry team under her guidance couldn’t improve every policy for sailing the Indian financial ship in troubled waters.
The major decisions in the year which have shaped the condition of the economy in the current year are -
1. Corporate tax cuts
After five consecutive quarters of slowing growth in India in 2019, the country lost its status as the fastest-expanding major economy to China. To take India out of the economic slowdown situation, on September 20, 2019, Nirmala Sitharaman announced Corporate Tax Rate cuts to give a boost to the Indian Economy. The government cut down basic corporate tax rate to 22% from 30%, while for new manufacturing companies it has been cut down to 15% from 25%. The government has been announcing a series of measures to boost growth that had fallen to six-year low of 5% in June 2019 quarter. However, this decision was mostly questioned by the citizens and economists considering the major loss of revenue it will cause to the Government in already bad circumstances.
2. Foreign Direct Investment (FDI) push
The Government’s next step to stabilise and redeem economic growth was to focus on the increment of FDI in the country. The next step for this year was the FDI push to achieve a target of fiscal deficit of 3.3 percent by FY20. Through this,the Finance minister advocated FDI in MSMEs, Central Public Sector Enterprises (CPSEs), PSUs, insurance intermediaries, aviation, NRI investment, among others.
3. Foregoing surcharge on FPI
Finance Minister Nirmala Sitharaman announced rollback of enhanced surcharge on foreign portfolio investors levied in the Budget, withdrawing the surcharge on long and short term capital gains from transfer of equity shares.
Certain Data showed FPIs pulled out Rs 23,000 crore from domestic equities in July and August, and made investment in Indian equities unattractive.
4. Angel Tax
In an attempt to help the startup culture, the Finance Minister withdrew the Angel Tax provision for startups and their investors. This decision was taken well by startup owners as they had been seeking relief from this tax for a long time. Angel tax refers to tax payable on capital raised by unlisted companies through issuing shares. In such issues of shares, the share price is in excess of their fair market value determined.
5. GST Refunds
In 2019, the Government took a decision for MSMEs to get all their pending GST refunds within 30 days. Further, all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 60 days from the date of application. This decision however is dependent on a lot of factors and insufficiency of technological infrastructure can and gave brought several problems in its implementation.
The major problems faced by the economy in 2019.
1 Continuous denial in accepting economic slowdown by the finance minister and the government.
2. Lack of proper measures to control the fall in economic growth.
3. Increasing unemployment rates and increment in Income disparity.
4. Failed policies like Demonetisation having an overlying negative effect.
5. Inability in proper implementation of the GST and Make in India schemes even after launching them in the previous years.
6. Several tax cuts reducing government revenue and not having any positive effect on businesses either.
In September, the GST collections fell to a 19 month low. Nothing was helping to revive business in India with a huge economic slowdown. Even the festival season, didn't bring any good news for the businessmen or economy in 2019. There seemed to be almost negligible positives in the year, having the economy sinking deeper and deeper down with each passing month. Sales of domestic as well as foreign companies continued to fall with the greatest hit suffered by the automobile sector. The unemployment rate rose rapidly throughout the year and the standard of living dropped continuously. The Government could not do anything or did not take substantial efforts to revive and redeem the economy in this year ending the decade on a very low note in terms of economic growth.
It remains to see what the new year brings for the economy now, hoping that things change for the better and the growth in economy only increases from here on.
Wishing a very happy and healthy New year to everyone! We sincerely hope that the new year brings new beginnings and new reforms for the economy, all of them being positive fingers crossed!