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Tax Policy Changes to Allow for Freeing Up Cash-Flows that Companies can Utilise

A perspicuous manner of looking at the expenditure-revenue play would be to look at the cash flowing into the economy

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Finance, Ministers, Corporate
Essentially, the tax policy changes will allow for freeing up cash-flows that companies can utilise to make capital allocation decisions ranging from capital expenditure, talent acquisition. IANS

The Finance Ministers announcement to bring down corporate tax rates in India will surely provide a substantial boost to the economy. Essentially, the tax policy changes will allow for freeing up cash-flows that companies can utilise to make capital allocation decisions ranging from capital expenditure, talent acquisition, or strengthening the balance sheets.

A perspicuous manner of looking at the expenditure-revenue play would be to look at the cash flowing into the economy due to the policy changes. The taxation policy changes that allow for lower corporate taxes will allow more cash in hand for corporates. It is expected that additional cash in the hands of the companies will allow for a slew of opportunities to be tapped into by the corporate sector. Most importantly, the fiscal boost will benefit the industry supply chains as the excess cash will boost corporates and their suppliers, thereby having a positive ripple effect.

Firstly, for cash-strapped corporates, this is an opportunity to get their capital structure in order. In an economy where companies have faced issues with excessive debt, this is an opportunity for the cash to be utilised to pare back debt and repay lenders thereby both improving corporate balance sheets and pumping credit into the system. Secondly, excess liquidity that will be available will allow Indian companies to gradually start competing better on a global level through capital expenditure in areas they deem necessary. Thirdly, cash in hand also makes Indian companies a more attractive destination for both domestic and international capital (which of late has been going out).

Whichever way one looks at the tax changes, the excess money will help whether corporates decide to invest the money, pay back loans, buyback debt, pay shareholders, or boost salaries. Primarily, the cash flow positive nature of the policy changes by the government will provide a significant fillip to economic growth. More importantly, if the policy implementation is done well, then the positive multipliers for the economy will be much beyond this financial year. Structurally, low tax rates can have significant positive multiplier effects in the years to come.

Finance, Ministers, Corporate
The Finance Ministers announcement to bring down corporate tax rates in India will surely provide a substantial boost to the economy. Pixabay

Now with robust tax policy moves to boost the economy through “expenditure”, the government must focus extensively on the “revenue” generation side. As with all policy changes, especially expansionary fiscal policy, there is now the need to generate the excess cash by the government that will be ploughed back into the economy. In layman terms, how can the government generate more money despite the substantial cut in tax rates that will be effectively used for boosting the economy?

Therefore, now is the time also to start focusing on effective “revenue” generation to fund the expansionary fiscal policy. The revenue foregone to fund the corporate tax cuts, as stated by the government, is Rs 1,45,000 crore. More effective revenue generation policies are therefore the need of the hour. Non-tax revenue sources such as asset monetisations must be focused upon to ensure a steady flow of cash that can help finance the revenue foregone.

While asset monetisation from the government saw some action in terms of the NHAI TOT auctions last year, given the moves on the “expenditure” side, this is the time to ensure that the “revenue” generation side picks up in speed, efficiency and clarity. Monetising assets ranging from land banks sitting with government institutions, cash-generating infrastructure assets, and inefficient companies has been debated upon for long. Now is the time to implement a clear roadmap to generating revenues through such monetisation schemes. Because the advantages of such non-tax revenue generation schemes are multi-fold, for one, such schemes will assist in providing revenues that are needed to fund fiscal policy. For the other, markets and investors will have greater confidence seeing a smoothening in the policy frameworks that help cash to flow into productive uses within the economy � thereby generating greater investor confidence in Indian investments.

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The issues that corporate balance sheets and the broader Indian economy have faced over the last few years at a core level are cash-flow related, or rather a shortage in liquidity. Policy moves such as the present cut of tax rates for the corporate world, aimed at freeing up cash-flows on corporate balance sheets, and policies aimed at effectively generating the cash-flows as mentioned above will provide a significant boost to the Indian economy. Going forward, the ability to balance the effective policy framing and implementation on both the “expenditure” and “revenue” side will be the real gamechanger. (IANS)

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5 Less Known Activities You Can Actually Fund Through Bank Loan

Here are the lesser-known expenses that you can fund with the help of bank loans

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Bank Loan
There are 5 Less Known Activities You Can Actually Fund Through Bank Loan. Pixabay

Unplanned expenses can crop up anytime in your life. With a fixed amount of salary, sometimes you are left without savings for an unforeseen expense. However, with numerous loan options available from all sizes of banks, you can relax and take a deep breath. 

In today’s world, there is a variety of loan options offered by financial institutions, such as personal loan, car loan, education loan, house loan, and so much more. Given the factor that it is not always necessary that you need to go for a loan because you want to buy a car or a house. Here are the lesser-known expenses that you can fund with the help of bank loans: 

1 Planning a Family Vacation

It is said that the best travel experiences are unplanned. However, when you make random family vacation plans, you don’t always have enough money kept aside for it. Catering to such needs, there is an ample number of banks that offers personal loan for planning a family vacation. These loans provide a lower interest rate than that of any credit card. So, if you are planning to go for that trip that you have been preparing for so long, taking a loan from a bank is your best bet.

Bank Loan
However, with numerous options from Bank Loans, you can relax and take a deep breath. Pixabay
  1. Funding a Wedding

In India, weddings are considered a matter of pride. You love to go big and plan a spectacular big fat wedding. However, big celebrations often cost big money. The day to day expenses makes it impossible for you to stop and think about saving for your such expenses. So, what do you do when you go across your wedding budget? It’s simple; you can take out a loan to fund your wedding expenses. 

The best part of taking personal loans for a wedding is that you can repay the loan in inexpensive Equated Monthly Instalments (EMIs) over a flexible tenure of your choice. You can compare the EMI on an online EMI calculator to get a fair understanding of the ratio of principal interest to the interest due, based on the tenure and the interest rates.  

  1. Renovation of Home 

If you are a homeowner, the chances are that with time they’ll need repairs. Though, unfortunately, most of the upgrades come along with a hefty price tag. To ease this issue, you can go for a personal loan offered by reputed financial institutions like Axis Bank. First, make a list of the renovations that are required and the amount of money that you will need for the same. Then, with the help of an EMI calculator, you can evaluate the amount that needs to be paid through the EMI and let you make an informed decision about the loan. 

Bank Loan
However, mutual funds Investment with a Bank Loan can be risky as the returns are market linked. Pixabay
  1. Investing in Mutual Funds

You must have heard the financial lingo “invest a loan,” which means that you take a loan from the bank to invest in mutual funds. Taking a loan to invest in mutual funds can be fruitful in many parts like you can have a higher return on investment of the loan as opposed to a lower risk level of investment. However, mutual funds Investment with a loan can be risky as the returns are market linked. Therefore, you need to assess your risk tolerance and start by investing small amounts in different fund options. You can invest in SIP after calculating the monthly SIP amount using online SIP calculator and get good returns. When you keep such instances aside, investment is one of the lesser-known activity that can be funded by a bank loan.

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  1. Pay the Credit Card Bill

Indians have made the usage of credit card an essential part of their life. There are times when you need money to buy a gadget or a home appliance on an urgent basis. You might not have savings to match such emergencies and end up using your credit card. At the end of the month, you must clear your credit card bill, but you do not have enough in your account for the same. For such instances, you can take a personal loan to pay your credit card bills.