In a virtual mini-budget, the government on Sunday slashed Cenvat by
four per cent across the board to boost demand and announced Rs 20,000
crore additional non-plan expenditure as part of package to stimulate
the economy, hit hard by the global financial crisis.
The much anticipated package, set rolling by Prime Minister Manmohan
singh who is also the Finance Minister, targets to power exports,
housing, auto, small and medium industries and infrastructure sectors
through additional funding and guarantees that a total amount of about
Rs 35,000 crore.
The 10-point package contains substantial incentives for the sectors
that have been hit by the global slowdown and recession in the west,
besides allowing India Infrastructure Finance Company Ltd to raise Rs
10,000 crore through tax free bonds by March as part of efforts to
support Rs 1,00,000 crore programme in the high-way sector.
"The government has been concerned about the impact of the global
financial crisis on the Indian economy and a number of steps have been
taken to deal with this problem," an official statement said in New
Delhi.
The steps taken by the RBI to pump sufficient liquidity in the
financial system are being "supplemented by fiscal measures designed
to stimulate the economy. In recognition of the need for a fiscal
stimulus the government had consciously allowed the fiscal deficit to
expand beyond the originally targeted level".
As part of steps to create demand in the economy that is expected to
grow by over seven per cent, "the total spending programme in the
balance four months of the current fiscal year, taking plan and non-
plan expenditure together is expected to be Rs 3,00,000 crore."
Reflecting high priority for the exports, which for the first time in
five years recorded a negative growth at 12 per cent, the government
provided Rs 1,450 crore toward refund of excise duty and incentives,
besides giving a guarantee of Rs 350 crore for difficult market and
product exports.
To bring down the cost of exports, hit by a sharp devaluation of rupee
in the recent months, the government also offered a two per cent
interest subsidy for labour intensive products like textiles, leather
and SMEs, subject to a minimum interest of seven per cent.
It said, "As an immediate measure to spur additional spending, an
across-the-board cut of four per cent in the ad-valorem Cenvat rate
will be effected for the balance part of the current fiscal on all
products other than petroleum and those where the current rate is less
four per cent."
The public sector banks will soon announce a package for borrowers of
home loans up to Rs five lakh and between Rs five lakhs to Rs 20
lakhs, the statement said adding that additional measures would be
taken as necessary to promote an accelerated growth trajectory in the
housing sector.
Stating that RBI has already announced a Rs 4,000 crore refinance
facility for the National Housing Bank, government said that the low
cost Indira Awas Yojna is another area where plan expenditure can be
increased easily.
Terming as "critical" the medium, small and micro enterprises (MSMEs)
for job creation, the government sought to boost the collateral-free
lending on loans from Rs fifty lakh to Rs one crore with guarantee
cover of 50 per cent.
Besides, the lock in period for loans under existing credit guarantee
scheme are being cut from 24 to 18 months, a move that would encourage
banks to give more loans to the sector, the government said, adding
that PSUs are being asked to ensure prompt payment of bills to MSMEs.
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