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Economic Dose II
Bhagyashree Pande
Tribune News Service

New Delhi, January 2
Planning Commission deputy chairman Montek Singh Ahluwalia today announced the second and maybe the last stimulus package for the economy by the UPA government.

The package, which comes along with the cut of reverse repo and CRR by the RBI, is intended to provide adequate credit in the economy that has been showing a considerable slowdown since September, Montek said.

The package includes increase in plan expenditure upto Rs 20,000 crore so as to strengthen the ongoing programs in rural, infrastructure and social security schemes. In addition to this, the government has taken measures to make liquidity and easy credit available to industries, infrastructure developers and exporters.

To give a boost to the sagging industrial sector, an across the board 4 per cent cut in advalorem cenvat rate has been announced.

India Infrastructure Finance Limited will raise Rs 10,000 crore to refinance banks’ lending for infrastructure projects. Corporate houses accessing credit from outside India will see further liberalisation of external commercial borrowing norms. Corporate bond market will see an increase in foreign institutional investment limit in rupee denominated corporate bonds from $6 billion to $15 billion.

The government will allow development of integrated townships and access to external commercial borrowings to give boost to the housing and construction sectors, which are facing severe pressure.

As a key measure to revive the economy, the package will facilitate funding of about Rs 25,000 crore for pending highways and port projects.

Troubled exporters have also received reprieve in the form of higher rates for tax refunds and commitment that the flagship reimbursement duty entitlement pass book scheme would be extended up to December 2009, the government said. Besides, Exim Bank has obtained from the RBI a line of credit of Rs 5,000 crore and will provide pre-shipment and post-shipment credit to Indian exporters at competitive rates. Specific sectors like knitted fabrics, bicycles, agricultural hand tools and some categories of yarn would get duty draw backs at enhanced rates.

Commercial vehicle manufacturers, who have been hit hard due to decline in sales, are expected to see demand revival with accelerated depreciation of 50 per cent on vehicles purchased between January-March this year. Non-banking finance companies, which are generally active in funding commercial vehicles, would be provided a line of credit by the public sector banks.

The government will set up a fast track monitoring committee to ensure expeditious approval and implementation of the Central government projects.

In addition to this, the government said it would revise the credit targets of public sector banks upwards and would also recapitalise public sector banks Rs 20,000 crore in two years’ time.

The government expects the growth to be around 7 per cent for 2008-09. “The credit crisis will likely prolong till the end of 2009 and it will be difficult for the world economy to maintain the growth momentum,” Montek said.

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