The Hindu Business Line : Govt to push for easier credit, more duty reliefs

UPA Govt’s booster
Labour-intensive export segments such as leather and leather products, marine products and textiles to get a push
Possibility of duty cuts in mass consumption items such as pulses
Import duty on essential consumables both by people and industry may be cut to ensure indigenous supply at moderate rates
Monetary policy measures to meet credit needs of productive segments, consumers

G. Srinivasan

New Delhi, Dec. 25 The UPA government’s second and final stimulus package for the current fiscal, would focus on credit availability to industry and trade at affordable rates with some policy rate adjustments by the Reserve Bank of India, sources here familiar with the development, told Business Line.

They further noted that since labour-intensive export segments such as leather and leather products, marine products and textiles had suffered severely due to the drop in overseas orders that led to retrenchment of workers, the second stimulus would address these specific sectors in a bid to bolster them.

Asked whether there would be any duty cuts particularly at a time when both customs and excise collections have been falling since September 2008, the sources said that there would be a possibility of duty cuts in mass consumption items such as pulses in the second stimulus.

Not passed on

They said the 4 per cent cut on Cenvat rates on manufactured items announced in the first stimulus did not get passed on to end-users in a manner that the authorities thought it would. Hence the authorities intend applying the duty cuts on imported items of mass consumption that would help stoke domestic consumption and also help import-intensive export production.

They also cited the recent mid-year review of the economy of the Finance Ministry which has pointed out that “a rise in the prices of imported commodities also acts an implicit tax on the citizens of this country and could therefore have reduced private consumption demand, resulting in the moderation of GDP growth rate to 7.8 per cent in the first half of 2008-09”.

Even as prices of imported items have declined broadly, further cuts in import duty on essential consumables both by people and industry would help ensure greater indigenous supply at moderate rates, they said. The sources further said that as far as this fiscal goes, the second stimulus package would be the last and there won’t be any further sector-specific booster dose with the UPA government into its last few months of its five-year term. However, they hastened to add that the monetary authorities would continue to apply tools available in their armoury if they sense that policy rates need to be tweaked to help benefit the economy as and when situation warrants.

The authorities are not averse to monetary policy being continuously deployed to help keep the credit needs of the productive segments as also of consumers, sources said.

These sources also told Business Line that after announcing extra Plan expenditure of Rs 20,000 crore in the first batch of stimulus announced on December 7, the government does not want to add more on Plan expenditure as there are less absorptive capacities with spending Ministries even to spend on the extant programmes.

The Prime Minister’s apex panel comprising the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia; the RBI Governor, Dr Duvvuri Subbarao; the Cabinet Secretary, Mr K.M. Chandrashekar; and the Finance Secretary, Mr Arun Ramanathan, chaired a meeting late Wednesday to finalise the second stimulus package.

Related Stories:
Govt confident of economy bouncing back next fiscal
Fiscal stimulus package: Welcome moves but room for more
Second stimulus package on the cards