Home loans sweetened, infrastructure to spur growth
The Govt 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, report HT Correspondents.business Updated: Dec 07, 2008 21:13 IST
Housing Easier loans
The government announced on Sunday a refinance facility of Rs 4,000 crore for the National Housing Bank outlined by the RBI a day earlier.It also said that public sector banks (PSBs) would shortly announce a special package for home loan borrowers in two categories — up to Rs 5 lakhs and Rs 5 lakh to 20 lakhs.
Real estate developers welcomed the move, but added it did not go far enough. Unitech Ltd’s Chairman Sanjay Chandra called the move “a good first step” by the government though he expects the limit to be increased up to Rs 30 lakh. DLF Ltd’s Chief Financial Officer Ramesh Sanka said he expects demand to pick up in the next one month but would take at least six months for new projects to get started. Parsvnath Developers chairman Pradeep Jain said the package was good only for tier-II and III cities and not metros.
Textile Funds for tech
The beleaguered textile sector, stung by declining orders from the world’s largest market the United States, has been given an additional allocation of Rs 1,400 crore will be made to clear the entire backlog in technology upgradation fund (TUF) scheme.
TUF schemewas launched for textile and jute industries in 1999that offers several benefits including interest rate reimbursement, and credit linked capital subsidy for the small scale sector.
The Apparel Export Promotion Council (AEPC), however, said it is disappointed by the package. “More concrete measures need to be taken to reverse the downturn in exports of readymade garments and avoid further job losses in the sector,” Rakesh Vaid, chairman, APEC, said. “The allocation of Rs 1400 crore has been pending for many years is for payment of arrears. There is nothing new in it.”
Infrastructure Bond bonanza
The government, flagging infrastructure as “an engine for growth” in the coming years, has authorised the India Infrastructure Finance Company Ltd (IIFCL) to raise Rs.10,000 crore through tax-free bonds.
“These funds will be used by IIFCL to refinance bank lending of longer maturity to eligible infrastructure projects, particularly in highways and port sectors,” an official statement said.
Refinance refers to the replacement of an existing debt obligation with a debt obligation bearing different terms, at lower rates or in a changed repayment schedule. IIFCL will be permitted to raise further resources by issue of such bonds. In particular, these initiatives will support a public-private partnership programme of Rs 100,000 crore in the highways sector.
Exports 2% subsidy
The government’s fiscal package on Sunday provides an interest rate subsidy of 2 per cent for labour-intensive sectors such as textiles, handicrafts, leather and gems and jewellery, but beleagured exporters think the measures are not enough. “These measures will not help us to be price competitive and therefore not boost exports,” Federation of Indian Export Organisation (FIEO) convenor Subhash Mittal said.
As much as Rs.1,100 crore will be provided for refund of terminal excise duty and central sales tax and an additional allocation for export incentive schemes of Rs.350 crore will be made by the government. Exporters will also get back-up guarantees worth Rs.350 crore and a refund of service tax on foreign agent commissions of up to 10 percent of the value of their exports.
SMEs Loan guarantees
The government has singled out small and medium enterprises for special attention and announced a guarantee cover of 50 per cent for loans of between Rs 50 lakh to Rs 1 crore for such firms. The lock-in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months, to encourage banks to cover more loans under the scheme.
Besides, the government will instruct state-owned companies to clear early bills presented by small and medium-sized firms. “Easing of credit conditions generally should help public sector companies to make such payments on schedule,” an official statement said.
“Government will issue an advisory to central public sector enterprises and request state public sector enterprises to ensure prompt payment of bills of medium and small enterprises,” an official statement said.