In a review meeting convened today by Cabinet Secretary K M Chandrasekhar, top government officials felt the impact of the three stimulus packages announced so far by the government has not yielded desired results in certain intended sectors like housing, exports and infrastructure.
Some signs of revival are seen in certain sectors like cement, steel and automobiles, but many industries have not yielded desired results in terms of higher production as demand remains muted, government officials felt at today’s meeting.
The meeting also noted that many measures were not reaching its intended users. Some of these were related to sops doled to exporters, like refund of service tax, which was yet to give actual benefit to the intended users. Representatives from Department of Economic Affairs, Ministry of Commerce and Planning Commission were among the officials who attended the meeting.
Another issue was on the deployment of funds by India Infrastructure Finance Corporation Ltd, which was allowed to borrow Rs 30,000 crore through tax-free bonds. The officials felt these funds should reach the infrastructure sector quickly.
It was also observed that money earmarked to state-transport undertakings to buy buses under Jawaharlal Nehru National Urban Renewal Mission, which was allowed as a part of the stimulus measures, has not resulted in higher orders for manufacturers of commercial vehicle. It was expected that this move would generate an additional demand of more than 14,200 buses. “But it was seen that only 3,500 orders were placed by the state governments, even after the funds were released. Reasons should be found out for this,” the official added.
The government has announced three stimulus packages since December 2008. The ongoing global recession has taken out the steam from the pace of growth of the Indian economy, which according to the Reserve Bank of India is likely to expand by nearly 6 per cent in 2009-10, against an advance estimate of 7.1 per cent in the just ended fiscal.
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The government has so far implemented three fiscal stimulus packages which involved reducing the excise duty rates by 6 percentage points in most of the products, sops to exporters in terms of interest rate subvention and Rs 20,000 crore additional plan expenditure.
These measures, along with a drop in growth rate of tax receipts, have led to fiscal deficit widening to 6 per cent of GDP. As a result, the Centre’s market borrowing crossed the Rs 3,00,000 crore mark in fiscal ended March 2009, against the initial projection of Rs 1,00,571 crore.