All about Recession
About:
- A recession is defined in macroeconomics as a significant decrease in a nation’s overall economic activity. It is usually acknowledged when the GDP and other monthly indicators, such as employment, reveal that the economy has been contracting for two consecutive quarters. Due to the GDP growth in India falling to a nearly five-year low of 5.8 percent in January-March, the country is currently in a recession. With an official estimate of 4.5 percent, the quarter from July to September saw the worst GDP growth in 26 quarters. The administration has put in place a number of measures to confront the recession and downturn.
The government has taken the following actions to address the nation’s ongoing recession:
- Investors: Both the additional FPI surcharge and the domestic equities market surcharge have been eliminated.
- It has been agreed to eliminate the additional fee imposed by the Finance Act (No 2) Act 2019 on long- and short-term capital gains resulting from the transfer of equity shares in order to promote investment in the capital market.
- For the purpose of opening demat accounts and purchasing mutual funds, Aadhaar-based KYC is required.
- To boost the possibility of credit default swaps, the administration will consult with RBI.
- Industry: A violation of the CSR would be prosecuted as a civil offence rather than a criminal one.
- The government has made the decision to front-load the Rs. 70,000 crore capital injection in public sector banks that was announced in the Budget in order to stimulate enhanced loan distribution by the banks and encourage private investment. This additional Rs. 70,000 crore will make an additional Rs. 5 lakh crore of loans available.
- GST refunds must all be paid, if they haven’t already, within 30 days. The full amount of any future GST refunds must be paid within 60 days.
- Automobile industry: BS-IV cars must be purchased by March 2020 in order to be operational for the duration of registration.
- Governmental agencies must replace outdated cars.
- The cost of vehicle registration will increase in June of the following year.
- For all vehicles purchased through March 2020, depreciation rises to 30%.
- MSMEs: The government has changed its tax policy to no longer benefit new businesses and investors.
- For MSME loans, there is a one-time settlement policy. Checkboxes in policy are expected.
- Laws must be changed to ensure a single MSME definition.
- The option to employ KYC based on Aadhaar is now available to NBFCs.
- The National Home Board raised its additional cash to support housing finance companies to Rs 30,000 crore.
- For the recapitalization of PSB, the government would release Rs 70,000 crore in advance.
- mortgages and auto loans
- Banks must lower their fees for mortgage and auto loans. The rate cut that the RBI announced would be passed down to customers by the banks. Loans from banks will be based on the repo rate.
- The National Housing Bank will boost the current $100 billion line of credit for housing finance companies by $200 billion (HFCs). HFCs will thus receive more liquidity at fair prices.
- For auto loans and mortgage loans, online loan tracking is accessible.
- Within 15 days after the loan’s end, PSBs are required to give the consumer their loan documentation back.
Moving forward:
- In the second part of the fiscal year, the RBI and the government’s monetary policy stimulus, together with the customary monsoons, would offer some consolation.
- The government may place a higher priority on expediting GST refunds and providing exporters with benefits specific to their sector.
- To change the pattern, fiscal spending must be increased, the fiscal deficit objective must be surpassed, and consumer confidence must rise.
- To expand their knowledge about electric vehicles, automotive industry workers need incentives.
- Enhancing the flow of credit to people and enterprises must be prioritised.
- There are numerous items there that will improve market and consumer mood.
- Actions must be made strategically to halt payment delays, get rid of the additional tax on local and foreign portfolio investors, ensure the transfer of reduced repo rates, and instil confidence in lending among bank authorities.
