The Government on Sunday announced a Rs 300,000 crore ($60 billion) package to boost the economy with specific measures for various sectors and contain the impact of the global financial crisis on India.
The amount is to be spent over the remaining four months on a host of areas and stake holders such as exporters, housing, infrastructure and textiles. A 4% cut in Value Added Tax has also been announced to help the corporate sector in general.
These measures were overseen by Prime Minister Manmohan Singh himself, in consultations with now Home Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Commerce Minister Kamal Nath.
The measures for exporters, who saw a decline in shipments in October for the first time in five years, include an interest support of 2% for labour intensive sectors like textiles, handicraft and handloom.
This apart, additional allocation has been made towards various incentives for exporters, guarantee of export credit, full refund of service tax to foreign agents and refund of service tax under the duty drawback scheme.
Instructions have also been given to state-run banks to unveil a scheme under which borrowers for houses under two categories—up to Rs, 500,000 and up to Rs.2 million—will get special incentives.
For small and micro enterprises, the limits under the credit guarantee scheme which gives access to working capital and other financial needs, have been doubled to Rs.10 million.
The lock in period for loans covered under the existing credit guarantee scheme is also being reduced from 24 to 18 months to encourage banks to extend more loans under the credit guarantee scheme.
The government has also authorised the India Infrastructure Finance Co Ltd (IIFCL) to raise Rs.100 billion ($2 billion) through tax-free bonds to support financing of government-financed infrastructure projects.
In a push to the automobile sector, government departments have been allowed to replace vehicles within the allowed budget, with a major relaxation in the time-consuming procedures.
This apart, import duty on naphtha for use by the power sector is being reduced to zero, while export duty on iron ore fines will be eliminated, and reduced to five percent for lumps.
Response of India Inc to this Package
As an immediate reaction to the package conceived by Prime Minister Manmohan Singh, who is also holding Finance portfolio, major auto companies including the market leader Maruti announced to cut prices by four per cent to pass on the tax benefits to the customers.
The realty players including DLF and Unitech said the measures would have a good impact, particularly in the non-metros by way of a demand-boost for houses, but felt that the package for home loans by banks should have been for borrowings up to Rs 50 lakh instead of the prescribed limit of Rs 20 lakh.
FICCI's Secretary General Amit Mitra said, "The package has enough punch to restart the overall economic activity through its massive Rs 3,00,000 crore in balance four months of the fiscal.... It also seeks to create additional demand through a cut in Cenvat.... It has taken a number of steps to support exports in the face of sagging global demand".
Unsatisfied by 'Rs 20,000 crore emergent package', Assocham President Sajjan Jindal said, "The industry was anticipating the demand booster package of Rs 70,000 crore" and hoped that the government would take more drastic measures to create the demand and ensure that the economy bounces back to its previous growth speed.
The apex chambers of commerce and industry, however, felt that incentives for the infrastructure projects as also the auto sector, should have been more.
Sources..
IBN
TOI
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