Much-awaited booster

UNION Finance Minister Nirmala Sitharaman’s booster dose that included a reversal of some of her budgetary proposals has come just when industrialists were beginning to despair and the stock market was tanking. In one fell swoop, the minister covered all three sectors in distress — housing and real estate, automotive industry and NBFCs (non-banking financial companies), besides addressing fears of ‘tax terrorism’ in the industry at large and of liquidity crunch among the medium and small industries. The Friday bonanza is not the end of the story as far as addressing the economic slowdown is concerned. Sitharaman has said she will come out with more corrective measures in the next two weeks. As outspoken industrialist Anand Mahindra said, the pronouncements were strong evidence of a listening capacity and the humility to do course correction.

In particular, Sitharaman has shown the pugnacity to learn from the adverse effects of her budgetary announcements and withdraw the tax surcharge on foreign portfolio investors that had led to a flight of capital. Her withdrawal of the angel tax as well as the higher surcharge on capital gains also showed her preference to walk back rather than persist with a wrong option.  She also assuaged the apprehensions of the industry after the suicide by Cafe Coffee Day owner VG Siddhartha. She declared that from October 1, I-T notices will be generated only by a centralised computer system and that there will be ‘faceless’ scrutiny of I-T returns from Dasehra.

However, challenges remain. Officials have been unable to quantify the aggregate revenue loss from the reversal of budgetary proposals, the permission to government departments to exchange their old cars for new ones and the doubling of permissible depreciation to 30 per cent. There is no clarity on how this revenue loss will be recouped or how 

Rs 100 lakh crore will be raised over five years for the infrastructure sector.  Other fiscal strains include the inevitably higher commitment on security. But the ability to take remedial steps should stand Sitharaman in good stead at a time when even global cues are turning unfavourable.