New Delhi: The government on Sunday announced major tax cuts across the board to boost demand and allocated additional funds and incentives for exports, housing, textile and infrastructure to stimulate the economy, hit by the global financial crisis.
“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.
The package, coming on the back of fresh monetary measures announced by the RBI on Saturday, includes a 4% cut in ad-valoram duty across the board, to boost additional spending, besides enhanced credit for exporters, along with a Rs10,000 crore mop up for India Infrastructure Finance Company.
“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 Rs20,000 crore in the current year,“ the statement said, adding the total spending programme in the four months ending March was expected to be Rs300,000 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 Rs5 lakh and between Rs5-20 lakh, the statement said, 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 authorised India Infrastructure Finance Co Ltd (IIFCL) to raise Rs10,000 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 Rs100,000 crore in the highways sector,” it said.
Paying special attention to exports, the government 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.
Besides, it would provide an additional Rs1,100 crore for full refund of terminal excise duty/CST and another Rs350 crore for export incentive schemes and a back-up guarantee of Rs350 crore to ECGC (Export Credit Guarantee Corporation) for providing guarantee for exports to difficult markets and products.