The government’s fiscal package, announced a day after the central bank cut a key interest rate, has Rs 20,000 crore in additional expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.
In addition, the government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector.
The government will also take steps to ensure that already budgeted expenditure of Rs 300,000 crore will actually be spent over the next four months of the current fiscal to end-March 2009, as it increasingly resorts to pump-priming to shore up the economy that continues to face headwinds from the global financial market turmoil.
These measures complement Saturday’s one percentage point cut in the repo rate cut announced by the central bank, and the refinance facilities for housing and small and medium industries that are designed to boost the flagging realty and manufacturing sectors.
Planning Commission deputy chairman Montek Singh Ahluwalia told reporters that the government would not hesitate in taking further expansionary measures if the economic situation worsened. The latest measures will lift the government fiscal deficit above its target of 2.5% of gross domestic product this year, Mr Alhuwalia said, adding that a higher fiscal deficit was tolerable in the current environment and was an appropriate “counter-cyclical” policy.
An official statement said the government has been concerned about the impact of the global financial crisis on the Indian economy. The global crisis has already forced several developed economies into a recession, and hit India too. The economic growth this year is expected to ease to around 7%, down from the 9% average of the past three years.
The housing and infrastructure sectors also received significant emphasis in the government package. To ensure that infrastructure projects are not starved of funds, the government allowed the India Infrastructure Finance Company to raise Rs 10,000 crore by way of tax-free bonds, giving it a larger pool of funds to refinance long-term loans to the sector. The power sector has been allowed duty-free import of naptha.
To read more, please, visit - -The Economic Times
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