Nirmala Sitharaman on Saturday announced a fresh set of measures worth around Rs60,000 crore. Reuters
With Gross Domestic Product (GDP) growth sliding to a six-year low of 5 per cent in the April-June quarter along with several sectors facing a slowdown, Finance Minister Nirmala Sitharaman on Saturday announced a fresh set of measures worth around Rs60,000 crore to boost exports and the housing sector.
The key measures include extending the scheme of reimbursement of taxes and duties for export promotion, fully automated electronic refund for Input Tax Credits (ITC) in GST, revised priority sector lending norms for exports and expanding the scope of Export Credit Insurance Scheme (ECIS).
An inter-ministerial working group has also been formed to monitor export finance. Accordingly, the scheme for Remission of Duties or Taxes on Export Product (RoDTEP) was announced which will replace Merchandise Exports from India Scheme (MEIS) for textiles.
In effect, RoDTEP will more than adequately incentivise exporters than existing schemes put together. The revenue foregone on this account is projected at up to Rs50,000 crore. However, existing dispensation in textiles of MEIS plus old ROSL scheme will continue up to December 12, 2019.
Textile and all other sectors which currently enjoy incentives upto 2 per cent over MEIS will transit into RoDTEP from January 1, 2020. Sitharaman also announced that Export Credit Guarantee Corporation (ECGC) will expand the scope of export credit insurance service (ECIS).
Effectively, this will offer higher insurance cover to banks lending working capital for exports. Further, Sitharaman revealed that Priority Sector Lending (PSL) norms for export credit have been examined and that the enabling guidelines are under consideration of the RBI.
The new norms, if implemented, are expected to release an additional Rs36,000 crore to Rs68,000 crore as export credit under priority sector. Sitharaman announced to reduce turnaround time for exports by leveraging technology and benchmarking it to Boston and Shanghai ports.
Furthermore, the government will provide Rs1,700 crore for export guarantees and to cut credit cost for the exporters. Other measures like creation of Special dispensation for facilitating and on-boarding ‘handicrafts artisans and handicraft cooperatives’ directly on e-commerce portals for exports were also announced.
In addition, Sitharaman said that India will organise annual mega shopping festivals at four locations with four themes across the country in March, 2020. The minister came out with several measures to prop up the country’s housing sector which is considered as one of the main job creators.
Sitharaman said that there would be special window for affordable and middle-income housing.
Under this, a special window to provide last-mile funding for housing projects which are non-NCLT, non-NPA cases to complete unfinished projects. For this, a fund of Rs10,000 crore would be contributed by the government and “roughly the same size by outside investors.” The fresh set of measures to boost the economy has come in the wake of sinking business sentiment across the industry.
India’s GDP growth decreased for the fifth consecutive quarter in April-June 2019 to 5 per cent, the lowest in six years on the back of faltering domestic demand, with both private consumption and investment proving lacklustre.
With most engines of growth stuttering, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20.
Nirmala Sitharaman said there are clear signs of revival of most of the indicators of the economy with uptick in industrial production and fixed investment after economic growth plunged to a six-year low of 5 per cent in Quarter 1.
According to Sitharaman, “there is robust FDI inflows and record forex reserves. Fiscal deficit is improving and current account deficit is contained. There is revival of fixed investments already. The IIP (Index of Industrial Production) is on an uptick and so is production of core industries. Retail inflation has been contained at under 4 per cent”.
Growth in core sector activity quickened in July 2019 to 2.1 per cent, due to a recovery in the cement sector, according to official data.
The Index of Eight Core Industries had grown at just 0.7 per cent in June 2019.
However, July’s growth rate is far lower than the 7.3 per cent growth registered in the same month last year. The country’s foreign exchange reserves increased by $1.004 billion to $429.608 billion in the week to September 6, helped by a rise in foreign currency assets, RBI data showed on Friday.
In the previous week, the reserves had fallen by $446 million to $428.604 billion.
She said measures are being taken to improve credit outflow from banks. Also, transmission of interest rate cuts is being effected by banks, she said, adding she will meet heads of public sector lenders on September 19 to review the transmission.
Partial credit guarantee scheme for banks to buy assets of NBFCs has also been implemented, she said adding seven NBFCs have shown interest in the Partial credit guarantee scheme for banks.
Indo-Asian News Service