FLASH | Sunday, December 7, 2008 | Email | Print | 
Govt announces tax cuts, funds, incentives to boost economy
New Delhi
In a virtual mini-budget, the Government today 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 a 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 power exports, housing, auto, small and medium industries and infrastructure sectors through additional funding and guarantees 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 a Rs 1,00,000 crore programme in the highway 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.
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 5 lakh and between Rs 5 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 50 lakh to Rs 1 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.
Email | Print | Rate:
|