Stimulus package for economy on Saturday

The series of big-ticket measures proposed by a committee of secretaries today to boost demand and minimise job cuts will include a Rs 2,000-crore export package, a further relaxation in external commercial borrowing norms and Rs 15,000 crore budgetary support for infrastructure.

These and a raft of other measures discussed yesterday by the Prime Minister-headed apex panel, such as targeted tax breaks and interest rate subsidies, are expected to be announced Saturday, possibly in synch with expected Reserve Bank announcements of cuts in key lending rates, official sources said.

These measures were discussed over two days of meetings of the panel and finalised today at a meeting chaired by Cabinet Secretary K M Chandrasekhar.

The panel of officials include Finance Secretary Arun Ramanathan, Commerce secretary Gopal K Pillai, DIPP Secretary Ajay Shanker and Planning Commission Secretary Subhas Pani.

Sources close to the development also said special credit lines for the fund-starved housing and automobile sectors and excise cuts for commercial vehicles are also likely.

Excise breaks are also likely to be extended to small and medium textile, chemicals and auto-components enterprises.

“There is a feeling within government that there is no liquidity crunch but banks are unwilling to lend. That needs to be changed. It is also felt that the intervention has to take place now, otherwise the cost of any relief package later will be higher,” said the source.

Among the export relief measures that were reported in the media yesterday are a two percentage point interest rate subvention in export credit so that exporters from textiles, handicrafts, leather, marine products, gems and jewellery can access cheaper credit.

Duty drawback rates and duty entitlement passbook scheme (DEPB) rates, used by exporters to get back indirect tax paid on goods, will also be enhanced. Moreover, pending terminal excise duty reimbursements will be cleared.

The measures come at a time when the government believes that India’s exports this fiscal could be between $155 billion and $175 billion, possibly on the higher side but short of the $200 billion target set by the commerce ministry.

The government also feels that the non-banking finance companies (NBFCs) need to be boosted through additional credit. “Additional credit lines for NBFCs will be provided so that they can provide loans to auto and housing buyers. NBFCs comprise half the financial services sector and their failure will have severe ripple effects,” the sources explained.

The government is also likely to ask public sector banks to lower interest rates for loans to support demand and consumption.

Among other measures, the government through the RBI, is likely to provide Rs 50,000 crore to the India Infrastructure Finance Company Ltd to ramp up infrastructure financing in the country.

Also read: December 3: PM panel mulls relief for housing, core sectors