Economy Revival Measures

Finance Minister(FM) Mrs Nirmala Sitaraman announced measures for economy on Friday evening.

Prominent once are reversal of surcharge on Capital Gains, Passing of interest rate cut done by RBI to end user. Releasing pending GST credit. No harassment for tax payer. Suspension of increased registration duty on vehicle. Extra 15% depreciation on vehicle for this year.

This will cost Rs 1400 crores to exchequer in terms of loss of revenue on capital gain surcharge. There will be some more loss for registration duty and depreciation benefit tax saving.

Most important is government has shown it commitment for 5 trillion economy and serious about the timeline. These steps are more a sentiment and confidence booster for industry and business. As FM has promised for more measures we should look at growth revival soon. 

We should expect further cut in the interest and deposit rates as RBI may cut repo rate further in Oct 19 policy. A drastic reduction in interest rate make a lot of project viable. In capital intensive industries like Infra, Hotel, Housing, Energy, power, etc debt are 75% of total capital and interest are biggest item on expense side. A 1 % reduction of interest rate reduces cost by 5-7% which is direct contribution to profits. A lot of new project become viable and a lot of loss making project turn profitable. This also reduces gestation period of large capital intensive project.