Date: December 7th 2008 11:30:46 p.m.

Date: 8.12.08

Booster dose to economy

DH News Service, New Delhi:

In a calibrated move to kick-start demand in various sectors of the economy currently hit by the global slowdown the Union government on Sunday unveiled an economic stimulus package comprising tax cuts on a host of products, besides pumping in an additional Rs 20,000 crore to step up plan expenditure and offering incentives for job-generating sectors like textile, housing, exports and infrastructure.

As an immediate measure to encourage additional spending, an across-the-board cut of 4 per cent in ad valorem rates of Central Excise duty on all products will be effected for the remaining part of the current financial year, the government announced.

The 10-point stimulus package, which came close on the heels of fresh monetary measures announced by the Reserve Bank, envisages an additional plan expenditure of Rs 20,000 crore in the current fiscal to provide the ‘much-needed’ stimulus to the economy.

The total spending programme in the remaining four months of the current fiscal, taking plan and non-plan expenditure together, is expected to be Rs 3,00,000 crore. The blueprint of the package, worked out by the Committee of Secretaries, was approved by the high-powered Committee of Ministers headed by Prime Minister Manmohan Singh, who is also holding the Finance portfolio. The India Inc welcomed the package saying the duty cuts and other sectoral incentives would help generate demand through lower prices for domestic and overseas markets.

As an immediate response to the package, Maruti Suzuki, the major car maker announced a cut in prices of its cars by 4 per cent to pass on the tax benefits to the consumers.

As part of strategy to spur cycle of demand in various sectors of the economy through enhanced spending in infrastructure sector the government authorised Infrastructure Finance Company Limited (IIFCL) to raise Rs 10,000 crore through tax-free bonds by the end of March 2009. As part of efforts to boost the housing sector, which is a potentially ‘very important’ source of employment and demand for critical sectors, public sector banks will shortly announce a package for borrowers of home loans in two categories – up to Rs 5 lakh and Rs 5 lakh to Rs 20 lakh.

The Reserve Bank only on Saturday had extended a refinance facility of Rs 4,000 crore to the National Housing Bank to enable it to extend loans to middle and low income groups.

As part of the strategy to boost export, which has taken a beating in the global slowdown, the government decided to give an interest subvention of 2 per cent up to March end 2009 on pre and post-shipment export credit for labour-intensive exports like textiles, leather, gems and jewellery and marine products. However, this will be subject to minimum rate of interest of 7 per cent per annum.

Besides, the government will provide an additional fund of Rs 1,100 crore to ensure full refund of terminal Excise duty/ Central Sales Tax. There will also be an additional allocation for export incentive schemes of Rs 350 crore. The government will also provide a back-up guarantee of Rs 350 crore to Export Credit Guarantee Corporation to enable it to provide guarantees for exports to different markets.

To boost collateral free lending to micro and small enterprises - now facing acute credit crunch – the government doubled the current guarantee cover for loans up to Rs 1 crore from the existing limit of Rs 50 lakh.
Besides, the lock in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months, to encourage banks to cover more loans under the guarantee scheme.

To promote textiles sector, which generates maximum job opportunities and export earnings, the package allocated an additional Rs 1,400 crore to clear the entire backlog in the Technology Upgradation Fund Scheme.
All items of handicrafts will now be included under ‘Vishesh Krishi and Gram Udyog Yojana’ thus getting more fiscal benefits. To promote power generation the government removed import duty on Naphtha. Similarly, it eliminated export duty on iron ore fines and reduced it on lumps to five per cent.

In a bid to step up demand in auto sector – the worst hit in the current global slowdown scenario – the package allowed all government departments