New Delhi: India on Friday announced fresh measures to aid a slowing economy, including a big push for more roads, almost 100% risk cover on export earnings of small units, and an interest subsidy on home loans for the urban poor.
The hope is that these measures would spark building activity and have a multiplier effect on the rest of India’s economy.
The government also approved an integrated energy policy that proposes to increase electricity supply at the rate of 5.8% a year to meet energy demands that can sustain an ambitious 9% gross domestic product (GDP) growth in the next 25 years.
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The cabinet committee on economic affairs (CCEA) approved some 13 highway projects worth an estimated Rs16,326 crore. Many of these projects are already in various stages of bidding.
The National Highways Authority of India usually starts an auction as soon as the finance ministry’s public-private partnership approval committee clears a project, but projects are awarded only after a cabinet approval.
The new costs include an increase of 20% for projects that were estimated before 2006, and 10% for those made in 2007.
Awards of India’s highway stretches to developers had been at a near-standstill after some companies contested the government’s bid guidelines, as well as an increased risk perception among lenders.
The government is currently auctioning some 60 projects worth an estimated Rs70,000 crore. There are 66,000km of national highways in the country, representing some 2% of the country’s road network. The Planning Commission expects at least $60 billion (about Rs2.87 trillion) to be spent on highways in the five years to March 2012.
CCEA also approved Rs350 crore to the Export Credit Guarantee Corp. of India Ltd to raise risk cover to small and medium exporters from 85% to 95%.
At a press conference here on Friday, home minister P. Chidambaram said that for the non-micro, small and medium enterprises sector, the additional 10% support will be limited to exporters of textiles, gems and jewellery, leather, engineering products, carpets, auto parts and chemicals.
Banks financing these exporters would now be able to continue financing, even if losses occur in one or two transactions, since a higher risk cover would be made available under the export credit insurance scheme, the minister said.
“Global recession is likely to impact in terms of default in payment or delayed realization for exports already made, cash flow difficulties for exporters, (and) difficulty in executing orders in hand owing to lack of additional credit limit,” Chidambaram said.
The cabinet panel also approved restoration of water bodies at an estimated cost of Rs6,000 crore.
CCEA has also approved 5% interest subsidy for home loans up to Rs1 lakh taken during the 11th Plan period (2007-12) by the urban poor. The total subsidy, which would amount to Rs1,100 crore, is expected to leverage institutional finance of Rs3,870 crore.
CCEA also gave its approval to a proposal of Suzlon Energy Ltd to undertake a rights issue of Rs1,800 crore, which the company had “suspended.”
PTI contributed to this story.