Government announces Rs 20000cr fiscal stimulus package

The government has announced a Rs 20,000-crore fiscal stimulus package. In a release on the Press Information Bureau website, it stated, “[The] Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”
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Dec 10, 2008, 08.31 AM | Source: CNBC-TV18

Government announces Rs 20000cr fiscal stimulus package

The government has announced a Rs 20,000-crore fiscal stimulus package. In a release on the Press Information Bureau website, it stated, “[The] Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”

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Government announces Rs 20000cr fiscal stimulus package

The government has announced a Rs 20,000-crore fiscal stimulus package. In a release on the Press Information Bureau website, it stated, “[The] Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”

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Government announces Rs 20000cr fiscal stimulus package

The Government of India has announced a Rs 20,000-crore fiscal stimulus package.

 

In a release on the Press Information Bureau website, it stated, “[The] Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”

 

On Saturday, the Reserve Bank of India had announced a 100-basis points cut in the repo and reverse repo rate. (Also read: RBI cuts repo, reverse repo rate by 100 bps )

 

"In order to provide a contra-cyclical stimulus via plan expenditure, the Government has decided to seek authorisation for additional plan expenditure of upto Rs 20,000 crore in the current year. In addition, steps are being taken to ensure full utilisation of funds already provided, so that the pace of expenditure is maintained," the government's release stated. "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 package is aimed at providing support to exports, housing, MSME (micro, small and medium enterprises) sector, textile, infra financing sectors; and also contains a cut in the Cenvat rate and eliminates certain import and export duties.

 

As an immediate measure to encourage additional spending, the release said, an across-the-board cut of 4% in the ad valorem Cenvat rate will be effected for the balance part of the current financial year on all products other than petroleum and those where the current rate is less than 4%.

 

The release noted: “Housing is a potentially very important source of employment and demand for critical sectors and there is a large unmet need for housing in the country, especially for middle and low income groups. The Reserve Bank has announced that it will shortly put in place a refinance facility of Rs.4000 crore for the National Housing Bank.”

 

“As a further measure of support for this sector public sector banks will shortly announce a package for borrowers of home loans in two categories: (1) upto Rs.5 lakhs and (2) Rs 5 lakh-Rs 20 lakh. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory.”

 

“The Government attaches the highest priority to supporting the medium, small and micro enterprises (MSMEs) sector which is critical for employment generation,” the release further noted. To facilitate the flow of credit to MSMEs, the RBI announced a refinance facility of Rs 7000 crore for SIDBI which will be available to support incremental lending, either directly to MSMEs or indirectly via banks, NBFCs and SFCs.

 

In a bid to boost the textile sector, an additional allocation of Rs 1400 crore will be made to clear the entire backlog in TUF Scheme.

 

The government also aims to address the problem faced in infrastructure spending. “A large number of infrastructure projects are now being cleared for implementation in the Public Private Partnership mode. These projects may experience difficulty in reaching financial closure given the current uncertainties in the financial world.” In order to support financing of such projects, the Government authorised the India Infrastructure Finance Company Limited (IIFCL) to raise Rs.10,000 crore through tax-free bonds by March 31, 2009. These funds would be used by IIFCL to refinance bank lending of longer maturity to eligible infrastructure projects, particularly in highways and port sectors.

 

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