The Hindu Business Line : Second stimulus package on the cards

Likely provisions
The second package might provide interest subvention and higher DEPB (duty entitlement pass book) rate and drawback rate to troubled and labour-intensive export segments such as gem and jewellery, textiles, marine product and leather.

Our Bureau

New Delhi, Dec. 11

Even as the beleaguered domestic industry has not been satisfied with the fiscal stimulus package announced on Sunday, the Union Commerce and Industry Minister, Mr Kamal Nath, hinted at another batch of stimulus measures anytime next week to bolster the economy and boost sentiments among firms and markets.

At a function organised by the Spanish Institute of Foreign Trade and Industry and FICCI here, Mr Nath maintained that the second stimulus would be aimed at generating employment and ensuring that the credit needs of the industry were fully met.

In the next package, he said, “we will look at engineering sector, greater refinance facility for exporters, textiles and farm sector”.

Mr Nath said, “We have to ensure that our domestic demand continues and government will be taking all steps.

“We are again looking at something (package) for next week”.

In the first package announced on December 7, besides additional public expenditure of Rs 20,000 crore, the Government cut four per cent excise duty across the board and gave pre and post-shipment credit at an attractive rate through an interest subvention of 2 percentage up to end-March 2009 subject to minimum rate of interest of 7 per cent per annum, government back-up guarantee enlarged to the extent of Rs 350 crore to provide guarantees for exports to difficult markets/products, refund of service tax on foreign agent commissions of up to 10 per cent of f.o.b. value of exports, settlement of central sales tax and terminal excise duty dues for exporters.

Officials said the second package might provide interest subvention and higher DEPB (duty entitlement pass book) rate and drawback rate to troubled and labour-intensive export segments such as gem and jewellery, textiles, marine product and leather.

They further said since September the apex bank cut the cash reserve ratio, the proportion of bank deposit that is to be kept with the RBI, in stages by 3.5 percentage points to 5.5 per cent, releasing Rs 1.4 trillion into the system, statutory liquidity ratio by one percentage point.

The RBI has also cut the repo rate — the rate at which it lends to banks — by 2.5 percentage points to 6.5 per cent and reverse repo — the rate at which it sucks out liquidity — by one percentage point to 5 per cent.

These measures would also get reflected in interest cost to firms and exporters coming down in the coming days, they said.