Daily Financial News Analysis – 14th Dec’19

Table of Contents

Reform of Personal Income Tax

Finance minister Nirmala Sitharaman has indicated that personal income-tax reform could be on the agenda.
It would be useful to see restructuring of personal income tax as a structural reform rather than as a means of boosting short-term demand.
The reality is that salaried employees bear the bulk of the burden of paying personal income tax.
High-income earners among professionals, traders and producers in the unorganised sector get by without paying tax.
Effective use of GST and extending the reach of formal finance to all users of credit can bring all such people into the tax net.
Raise the cost of non-compliance by intelligent analysis of data and reducing the scope for evasion

The government’s schemes to help revive the flagging economy by supporting nonbanking finance companies (NBFCs) and housing finance companies (HFCs) and restarting stalled real estate projects are likely to start disbursing funds soon.
Under the partial credit guarantee (PCG) schemes for NBFCs, 17 proposals worth a total ₹7,657 crore have been okayed within two days of the cabinet deciding to lower the ratings threshold from AA to BBB+ for asset pools and clearing support for borrowers that had slid into SMA-0 category.
CHIEF ECONOMIC ADVISER Krishnamurthy Subramanian: Proposals amounting to about ₹20,000 crore are expected to be approved over the next two weeks.
He classified the steps that have been taken by the government in recent months into three
1. Those that support consumption
2. Those aimed at boosting investment
3. Reform measures

Revenue secretary Ajay Bhushan Pandey said the income tax department has issued refunds worth ₹1.57 lakh crore in the first 8.5 months of the current fiscal compared with ₹1.23 lakh crore in all of FY19, which will also help consumption.
The government expects the real estate fund to have a bigger impact on the economy through linkages.
The alternative investment fund (AIF), which will be managed by SBI Caps, will provide priority debt financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector.
Sitharaman promised help to those unable to get credit from banks.
India got $35 billion foreign direct investment (FDI) in the first half of the year against $31 billion in the year earlier, showing that measures to draw investors were bearing fruit.

Boris Johnson led Britain’s Conservative Party to a thumping election victory.
This will clear the way for the country to leave the European Union by January 31, 2020.
It will also be a beginning of potentially demanding trade deal negotiations the UK has to undertake with major economies, India possibly included.
Also, the sweep of Scotland by Scottish National Party, which is firmly against Brexit, again raised prospects of a serious threat to Britain’s territorial integrity via another push for Scotland’s departure from the union.
Global and Indian markets, which rose on the promise of a US-China trade deal also welcomed the end to the three-year long Brexit uncertainty.

The pace of decline in India’s exports slowed in November
Higher outward shipments of electronics goods, drugs and engineering goods.
Imports continued to decline indicating weakness in domestic demand.
November exports were down 0.34% and imports fell 12.7% leaving a trade deficit of $12.12 billion
$17.58 billion in November last year
$11 billion in October
Exports had contracted 1.11% in October and 6.5% in September.
Both domestic and global factors have led to this decline in exports.
Prolonging trade tensions and protectionism along with sluggishness in the economies across the globe has further added to the woes of the India’s exports sector.
Uncertainty over the Merchandise Export from India Scheme as a major cause of concern as exporters’ claim for over four months were pending, which wiped out their liquidity.
GST and Drawback claims have been held up

President Donald Trump signed off on a phase-one trade deal with China.
Averting the December 15 introduction of a new wave of US tariffs on about $160 billion of consumer goods from the Asian nation.
The deal presented to Trump by trade advisers on Thursday included a promise by the Chinese to buy more US agricultural goods.
Officials also discussed possible reductions of existing duties on Chinese products.
The terms have been agreed but the legal text has not yet been finalised.
Global stocks hit a record high for the first time since early 2018 and bond yields climbed on optimism over trade.
Trump tweeted that the US and China are “VERY close” to signing a “BIG” trade deal
The U.S. has added a 25% duty on about $250 billion of Chinese products and a 15% levy on another $110 billion of its imports over the course of a roughly 20-month trade war.
Discussions now are focused on reducing those rates by as much as half, as part of the interim agreement Trump announced almost nine weeks ago.