Coronavirus: Anil Singhvi's top 5 tips for government to revive economy
Among the measures, Zee Business Managing Editor Anil Singhvi recommends a policy rate cut and lowering of personal income tax to revive consumption
The tentacles of coronavirus are increasing by the day and it has disrupted the global economy in a big way. With the looming threat of the ongoing problem, the revival plans before the world look like a daunting task. Restoring sentiments till the virus is completely controlled is a tough task globally. India is no different. Already, over 50 cases have been reported here. In such a situation the government will have to think differently. Zee Business Managing Editor Anil Singhvi has 5 useful tips for the government.
Anil Singhvi says this is the right time for surgery and merely giving injections will not do the trick.
Anil Singhvi's 5 tips:
1) Central Bank should decrease the interest rates
This is the first step to give a much-needed boost to the economy. Central banks in most economies are decreasing interest rates. To deal with the global slowdown, the Reserve Bank of India (RBI) should cut the rates by 75 bps - 100 bps. The move may likely impact the bond markets and currency markets, but this is necessary, he says. It may also happen that the debt instruments may not remain attractive for overseas investors, but the arbitrage is likely to remain the same globally. This will have a two-fold benefit - one is that the low-interest rates will boost the economy and the second is that the government's interest bill will come down.
Listen in Anil Singhvi's 5 tips for the Finance Minister
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2) Reduction in personal income tax
The government needs to significantly cut the personal income tax. People having more money in their hands will have a good impact on the overall sentiment. The government may choose not to touch the higher income tax slabs but for people with an annual income of Rs 20-25 lakhs should get the benefit of the personal income tax cut. This will increase the consumption and restart the engine of growth.
3) A package for real estate and auto sector
The Indian economy has been suffering primarily because these two sectors have not been doing well. These two sectors are responsible for large scale employment too. Both sectors are facing an acute liquidity crunch as there has not been enough demand. The new homes are being built but nobody is ready to buy. There is a lot of interest on home loans. It is difficult to take a home loan and service it. There are not enough jobs in the market. The government should provide a stimulus package. This will encourage people to buy homes and vehicles.
4) Liquidity should be brought in businesses from income disclosure schemes
Time to bring in the Income Disclosure Scheme like the earlier Voluntary Disclosure of Income Scheme (VDS). Though, the government has already submitted an affidavit that it will not bring any such scheme. So, this scheme should be designed in such a way that it does not go against the government's stand. Allow people to declare to what they want to. Give them a last opportunity to declare whether it is gold, property, or income. No questions asked. Something in the scheme should be there which says that this much penalty will be levied and it will be refunded in 1, 3, 5 years. This will give an immediate cash flow to the government.
5) The government should remove Long Term Capital Gains tax and also reduce the Dividend Distribution Tax (DDT)
The government will not get a more appropriate way to cheer-up the investors. LTCG should be removed with immediate effect. This will allow domestic investors to put more money into the market and also earn more. The sentiments towards the capital markets will revive again. The DDT should also be limited to a level on the dividends. The income between Rs 5 and 10 lakhs should invite a lower DDT. The 35% tax is not good at all.
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Anil Singhvi says that these five suggestions should be immediately looked into by the finance ministry.
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