Will budget sops help India reach $5t economy goal?

The Indian government’s aim to make the nation a $5 trillion economy did encounter loads of challenges in 2020, despite multiple stimulus and sops to pare the impact of the novel coronavirus disease (Covid-19) outbreak to propel the economy towards growth.

Non-resident Indians (NRIs) globally have moved back home for multiple reasons and are now trying to find some foot in their bid to rehabilitate themselves. The trend did impact the real estate sector positively. Timely government intervention to keep lending rates at lowest, coupled with reduction in stamp duty, encouraged many developers to offer flexible payment plans.

Dr Azad Moopen, founder chairman and managing director (CMD), Aster DM Healthcare, said: “Large numbers of NRIs have been rendered jobless and returned to India due to the pandemic. There is a requirement for a scheme for rehabilitation of the returning NRIs by providing them with jobs and seed capital for starting businesses. Initiatives to provide skill development for them must begin.”

India’s economy is expected to contract 7.7 per cent in the current financial year ending on March 31, the worst performance in four decades, which is likely to prompt the finance minister to make a push for growth in the budget next month, said a Reuters report recently.

India realty

In the aftermath of the Covid-19 pandemic, Indian economy is grappling with the challenges of recovery, expectations from the upcoming union budget are high. Real estate sector, as a generator of jobs (14 per cent) and major contributor to the gross domestic product, or GDP (7 per cent), is optimistic to seek major reforms with timely policy interventions by the government in order to mitigate the negative impact and stimulate the growth engine.

Dr Niranjan Hiranandani, national president, Naredco, said: “The on-going Covid-19 pandemic has impacted global economies and Indian real estate is not spared from the depths of despair. The fiscal impetus announced under Aatmanirbhar Bharat has led to renewed consumer demand that led to the emergence of green shoots in Indian economy and real estate sectors. The laudable measures like tax rationalisation, additional stress fund, ample liquidity tools will keep the momentum going and propel India towards a $5t economy. Towards this goal, Naredco seeks to work hand-in-glove with the government to achieve this ambitious goal.”

Currently Section 80 C tax deduction on home loan principal repayment does not provide for a focused benefit on housing. A separate annual deduction of Rs150,000 (Dh75,000) will provide the much-needed fillip to opt for house purchase, said Shishir Baijal, CMD, Knight Frank India.

Vijay Valecha, chief investment officer, Century Financial, said: “NRIs expect the TDS (tax deducted at source) rate on rental payments made to them to have a similar treatment as residents enjoy. Currently, section 194 IB of the Act provides for deduction of tax on rental payments made to residents at the rate of five per cent, as against a TDS rate of 30 per cent under Section 195.”

Remittance

NRIs had remitted around $80 billion (Dh293.84b) in 2019. It was one of the key pillars of the Indian economy. Not only do they support money transfers and inward remittances, indirectly and internally they also are responsible for generating employment by way of capital accumulation, savings and investment. Although this diaspora accounts for roughly only one per cent of the current India population, they are one of the major sources of foreign currency inflow.