Since the past few months, there have been various speculations regarding the stock market and the Indian economy wherein an inevitable slowdown and weakening consumer confidence might lead to the worsening of the conditions not only for the stock market but also for the country. India’s economic growth slowed to a five-year low of 5.8% in the January-March quarter and is expected to remain around that in the first quarter of the current fiscal year, with some key sectors like automobile showing severe strain.
The prime minister has been analyzing the trends and looking into the matters directly in order to find possible solutions that can bring the situation under control, especially with rising instability in the economy. Such conditions have also led to the loss of wealth for investors and stock market traders who have become victims of falling stock prices driven by market sentiments.
The Prime Minister is considering making some drastic changes to various policies based on the stock review done along with the Finance Minister. The meeting, which was held this Thursday, brought forward some key areas that could be targeted to bring about some relief. The possible outcomes of the discussion (focused on improving the current economic conditions) include sector-specific SOPs and tackling the issue of tax surcharge levied on Foreign Portfolio Investors (FPIs).
While the FPI tax surcharge may have received a lot of attention, but the on-going slowdown in the automobile sector (especially the passenger vehicles segment) has become a cause of concern. The statistics in July indicated a sharp fall of nearly 31% which was the lowest value from the last two decades. As a measure for improving the conditions, the automobile sector has sought reduction in GST as well as lowered registration as well as road tax. The decisions for these reforms are yet to receive confirmation but these changes could bring about positive movements in the sector. Subsequently, there will be an upward trend in the stock market resulting out of the improvements in the automobile sector.
The Super Rich Tax for FPIs (announced during Budget 2019) led to the decline of the benchmark stock index, BSE Sensex. There was a noticeable decline of 8% as compared to the bullish peak observed during early June. The decision affected almost 40% of FPIs that invest in India. The recent talks to provide relief to the tax surcharge will not only improve investments but also drive a bullish market which is really important to provide better conditions for stock market traders and investors.