Centre announces Rs.20, 000 crore stimulus package to boost economy

To counter the effects of the global financial slowdown and its impact on various sectors of the Indian economy, the Central Government on Sunday announced an Rs.20, 000 crore stimulus package that includes major across the board tax cuts to boost demand.

New Delhi, Dec.7 : To counter the effects of the global financial slowdown and its impact on various sectors of the Indian economy, the Central Government on Sunday announced an Rs.20, 000 crore stimulus package that includes major across the board tax cuts to boost demand.

A total amount of Rs.300, 000 crore 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 four-percent cut in Value Added Tax has also been announced to help the corporate sector.

"The government has been concerned about the impact of global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem," an official statement said, adding that these measures were overseen by Prime Minister Manmohan Singh, in consultations with Home Minister P. Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Commerce Minister Kamal Nath.

The latest package, which has come after fresh monetary measures were announced by the Reserve Bank of India (RBI) on Saturday, also includes enhanced credit for exporters, along with a Rs.10,000 crore mop up for the India Infrastructure Finance Company.

"The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year," the statement said.

"In order to provide a contra-cyclical stimulus via plan expenditure, the Government has decided to seek authorisation for additional plan expenditure of up to Rs.20, 000 crore (200 billion rupees) in the current year. The total spending programme in the four months ending March is expected to be Rs.300, 000 crore.

As part of efforts to boost the housing sector, the public sector banks would shortly announce a package for home loan borrowers in two categories -- up to Rs.500, 000 and between Rs.500, 000 to Rs.20, 00,000, the statement said while adding that additional measures would be taken, as necessary, to promote an accelerated growth trajectory.As a special gesture for the automobile sector, government departments would be allowed to take up replacement of vehicles within the allowed budget.

Attaching special significance to infrastructure development, the government has authorised India Infrastructure Finance Co Ltd (IIFCL) to raise Rs.10, 000 crore through tax- free bonds by March 2009 and said it would be permitted to raise further resources.

"In particular, these initiatives would support a PPP (Public-Private Partnership) programme of Rs.100, 000 crore in the highways sector," the statement stated.

Paying special attention to exports, the government has decided to provide an interest subvention of two per cent up to March 2009 for pre and post-shipment export credit for labour-intensive exports like textiles, leather, marine products and SME sector.

The concession is subject to a minimum rate of interest.

Along with that, it would provide an additional Rs.1,100 crore for full refund of terminal excise duty/CST and another Rs.350 crore for export incentive schemes and a back-up guarantee of Rs.350 crore to ECGC (Export Credit Guarantee Corporation) for providing guarantee for exports to difficult markets and products.

ANI