With a strong determination to protect India from the global economic slump down, Prime Minister Manmohan Singh announced a hefty bailout package on Sunday to increase its development expenditure, ease funds availability for infrastructure, and provide cheaper credit for housing and labour-intensive exports.
As per the government’s announcement, Rs 3,00,000 crore ($60 billion) package will be spent in the balance period (four months) of the current fiscal year with specific measures for various Plan and non-Plan expenditures, such as exporters, housing, infrastructure and textiles etc.
As a first step, an allocation of additional Plan expenditure of Rs 20,000 crore (200 billion) in the current year will be sought from Parliament, besides the government has approved a four percent cut in Value Added tax to assist the corporate sector in general, a two per cent subvention of interest to make credit attractive for textiles, leather, handicrafts, handlooms and other labour-intensive exports. The limits under the credit guarantee scheme have been doubled to Rs.10 million for MSMEs (medium, short, micro enterprises).
Moreover, an 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.
“The government has decided to seek authorisation for additional planned expenditure of Rs 20,000 crore in the current (financial) year,” the PMO said.
The government has also sought to encourage banks to extend more loans under the credit guarantee scheme by reducing the lock-in period for loans from 24 to 18 months. The bailout package 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.
Underlining the housing sector’s potential, which has seen steep decline in recent months, the govt said public sector banks would shortly announce a package for home loan takers in two categories: up to 5 lakh and from Rs 5 lakh to Rs 20 lakh.
The economic stimulus package would lessen the adverse impact of global financial crisis and would help India achieve a seven percent growth rate, the Planning Commission chairman Montek Singh Ahluwalia hoped.
The government hinted at more steps if needed. The government is keeping a close watch on the evolving economic situation and will not hesitate to take more steps needed to counter recessionary trends, the PMO said.
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