To boost exports, housing sector, FM Nirmala Sitharaman announces fresh stimulus package

As part of her third stimulus package for the economy, Finance Minister Nirmala Sitharaman on Saturday unveiled a set of stimulus measures to boost exports and the housing sector.

The new package of measures for exports sector came in six different silos and covered steps that would address comprehensively tax and duties refunds for exporters; improve credit flow to the export sector and launch of a special free trade agreement (FTA) utilisation mission. India will also now host annual mega shopping festivals in 4 places.

Exports

Sitharaman announced the introduction of a new attractive scheme for remission of duties or taxes on export product (RoDTEP) to replace the existing Merchandise Exports from India Scheme (MEIS) from January 1 next year and revised priority sector lending norms for export credit that will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector.

Sitharaman made it clear that RoDTEP would span all the sectors and the revenue foregone could be about Rs 50,000 crore. It is very difficult to put an exact number on this as the duty remission will vary from sector-to-sector, she explained. “With the introduction of RoDTEP, all the uncertainty over continuation of MEIS is over”, Sitharaman said.

Housing sector

As part of the measures rolled out today to boost the housing sector, Sitharaman announced that a Rs 20,000 crore fund (Rs 10,000 crore from Government and roughly same amount from outside investors) would be set up to provide last mile funding for affordable and middle income housing. This fund will be used to support projects that are non-NPA and non-NCLT projects and the objective is to focus on construction of unfinished units.

Also read: Government announces steps to boost housing, facilitate homebuyers

Nearly 3.5 lakh dwelling units ( non NPA and non NCLT) in the country are plagued with last mile funding problem, according to Sitharaman, who also announced that the fund would be set up as a Category-II AIF trust and would be professionally run with experts from housing and banking sector.

Economic Affairs Secretary Atanu Chakraborty later made it clear that the Government was “open” to bring in sovereign wealth funds as investors. Besides the Government, the other investors who are likely to contribute to the fund include LIC and other institutions and private capital from banks and DFIs.

For the housing sector, Sitharaman also announced that external commercial borrowing (ECB) guidelines will be relaxed to facilitate financing of home buyers who are eligible under the PMAY, in consultation with RBI.

This will be in addition to the existing norms for ECB for affordable housing, she said.

Also, the Finance Minister came up with some good news for government servants, stating that interest rates on house building advance will be lowered and linked with the 10-year G-sec yields. Government servants contribute to a major component of demand for houses, she added.

Also read: Stimulus package: MSMEs to get pending GST refunds within 30 days, says FM

Third stimulus package

Sitharaman’s third round of economy boost measures comes in as many weeks since the first unveiled on August 24 and the next on August 30.

It may be recalled that Sitharaman had on August 24 announced the government’s decision to scrap the increase in surcharge on the income tax outgo for both domestic as well as foreign investors that came into effect as part of the second full year budget of 2019. The first set of measures announced on August 24 also covered the automobile sector.

The second booster dose on August 30 involved mega bank merger plan that saw the consolidation of ten public sector banks into four entities, bringing down the overall number of PSBs in the country to 12.

Sitharaman’s booster dose for the economy comes at a time when the country had reported its weakest growth in more than six years at 5 per cent in the June quarter.

The previous low in GDP growth was recorded at 4.3 percent in Jan-Mar quarter of 2012-13. The economic slowdown has particularly been harsh on the automobile sector with domestic passenger vehicle sales having skidded for the 10th consecutive month in August, registering a 31.57 percent decline.

The International Monetary Fund (IMF) on Friday said that Indian economy was “much weaker” than expected. This was attributed to the corporate and environmental regulatory uncertainty and lingering weakness in some non banking financial companies.