[Answered]What is meant by recession? What steps has the Government of India taken so far to tackle the current ongoing recession in the country?

Demand of the question

Introduction. What is recession?

Body. Steps taken so far to tackle the ongoing recession in the country.

Conclusion. Way forward.

A recession is a macroeconomic term that refers to a significant decline in general economic activity in a country. It is typically recognized after two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators like employment. India is facing recession with GDP growth plummeted to nearly five-year low of 5.8 per cent in January-March. The official GDP growth estimate for the July-September quarter, at 4.5%, is the lowest in 26 quarters.Government has initiated various steps in order to tackle the recession and slowdown.

Steps taken by the government so far to tackle the ongoing recession in the country:

  1. Investors: Enhanced surcharge on FPIs and surcharge on domestic investors in equity markets withdrawn.
  • In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by the Finance Act (No 2) Act 2019 on longand short-term capital gains arising from the transfer of equity shares.
  • Aadhaar-based KYC for opening demat accounts and investment in mutual funds.
  • Govt to consult with RBI to enhance Credit default swap options.
  1. Industry: CSR violation would be treated as a civil offence, not a criminal offence.
  • The government also decided to front-load the Rs.70,000 crore of capital infusion in public sector banks that was announced in the Budget, a move aimed at increasing private investment by facilitating greater credit disbursal by the banks. This Rs.70,000 crore will lead to about Rs.5 lakh crore of fresh liquidity that can be loaned out.
  • All pending GST refunds till now shall be paid in 30 days. Future GST refunds to be paid in 60 days.
  1. Auto sector:BS-IV cars purchased till March 2020 to remain operational for the entire period of registration.
  • Govt asks its departments to replace old vehicles.
  • Higher vehicle registration fee deferred to June next year.
  • Depreciation increased to 30 per cent for all vehicles purchased till March 2020.
  1. MSMEs: Govt withdraws angle tax provision for startups and their investors.
  • One-time settlement policy for MSME loans. Policy to be based on checkbox approach.
  • Laws to be amended to ensure one MSME definition.
  1. For NBFCs:NBFC can now use Aadhaar-based KYC.
  • Additional liquidity to support Housing Finance Companies by National Housing Board increased to Rs 30,000 crore
  • Govt to release Rs 70,000 crore upfront for PSBs recapitalisation.
  1. Home, auto loans:Banks to make home, auto loans cheaper. Banks have agreed to pass on the rate cut announced by RBI to customers. Banks to launch Repo Rate linked loans.
  • For Housing Finance Companies (HFCs) the National Housing Bank will provide an additional line of funding of Rs 200 billion over the Rs 100 billion to HFCs. This will provide additional liquidity to HFCs at reasonable rates.
  • Online tracking system for home, auto loans.
  • PSBs to return loan documents to customers within 15 days of loan closure.

Way forward:

  1. Monetary Policy stimulus by the RBI and the government along with normal monsoons would provide some relief in the second half of the financial year.
  2. Sector-specific sops and smooth GST refunds to exporters can be worked on by the government.
  3. Increase in fiscal spending, deviation from fiscal deficit target, and boost in consumption sentiment are must to arrest the downtrend.
  4. Incentives to auto sector employees to up skill on electric vehicles is needed.
  5. Improving credit flow to both consumer and industry must be focused.

There are several measures there which will boost consumer sentiment and it will boost investor sentiment in any case.The comprehensive measures removing enhanced surcharge on FPIs (foreign portfolio investors) and DIs (domestic investors), securing transmission of lower repo rates, addressing delayed payments and ensuring that bank officials are confident about lending are strategically targeted towards raising investments.