Domestic industry could get more protection and car and two-wheeler loans could become easier under a new stimulus package of monetary and fiscal measures expected this week. Banks may be given room to reduce lending rates further.
Another cut in the RBI's benchmark repo rate—the short-term rate at which the central bank lends to banks—appears a distinct possibility as also a further easing of overseas borrowing norms for Indian companies.
A possible anti-dumping duty on imports on chemicals, steel and non-ferrous metals such as aluminium may help industry weather unfair competition from China and the Commonwealth of Independent States (CIS), said government sources who did not want to be identified.
The measures might also provide lower interest rates through a subsidy scheme for labour-intensive export schemes such as gem and jewellery, marine products, textiles and leather.
Prime Minister Manmohan Singh discussed the details on Saturday with a committee that includes Commerce Minister Kamal Nath, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Reserve Bank of India (RBI) governor Duvvuri Subbarao.
Since September RBI has cut the cash reserve ratio, the proportion of bank deposit that is to be parked with the apex bank, in stages by 3.5 percentage points to 5.5 per cent.
The RBI has also cut the repo rate by 2.5 percentage points to 6.5 per cent and officials indicated another 1 percentage point reduction in the benchmark rate appears a possibility.
The package is likely to allow greater duty drawback (refund) and duty entitlement passbook scheme (DEPB) benefits to embattled exporters in labour-intensive sectors. These will allow exporters higher reimbursements of indirect taxes paid.
India Inc, hit by a slowdown, has been persistently calling for booster steps.
"Quarterly corporate performance ins sectors such as textiles and chemicals show that the impact of the slowdown has been very severe Net profit margins for this sector fell by (-) 0.2 per cent from a growth of 4.3 per cent earlier," Confederation of Indian Industry (CII) director-general Chandrajit Banerjee said.
The government in the first package on December 7 announced an across-the-board 4 per cent cut in the Cenvat – a key indirect tax.
Industrial output in October contracted by 0.4 per cent and exports by 12 per cent, while excise duty collections fell by 15 per cent in November.