The government is likely to announce another fiscal stimulus package next week aimed to prevent further deceleration in the growth rate of the Asia’s third largest economy, Commerce and Industry Minister Kamal Nath said today.
“The package will be directed at employment-intensive sectors. It could include sops for engineering and textile sectors as well as refinance for exporters,” he said at the sidelines of a function organised by Spanish Institute of Foreign Trade here.
Initial estimates available with the commerce ministry show that exports dipped by over 10 per cent in November compared with growth of over 30 per cent in the same month last year. This will be the second consecutive month in which exports have dipped owing to a waning demand from overseas clients.
The new package is likely to include enhanced rates of Duty Drawback and Duty Entitlement Passbook Scheme (DEPB), which will allow exporters higher reimbursements of indirect taxes paid. Moreover, some sectors like textile could get additional subvention in interest rate on export credit. The Duty Drawback and DEPB scheme neutralises the incidence of basic and special customs duty as well as excise duty on import content of export product. This is provided by granting some duty credit against the export product.
“We have to ensure that our domestic demand continues and government will be taking all steps,” Nath added. He expects Indian exports to grow in the range of 16 to 20 per cent in 2008-09 as against an earlier estimate of about 25 per cent. “India is not heading for a recession. But there is a downturn,” Nath added.
The first trance of the stimulus package, worth at least Rs 30,000 crore, was announced last Saturday. The package included a two percentage point subvention in interest rate for export credit to labour intensive sectors like textiles, handicrafts and leather, an across the board cut of excise duty by 4 percentage points, and increase in public expenditure by Rs 20,000 crore.
In addition the government also pledged additional guarantee for export insurance as well as more allocations for reimbursements of Terminal excise duty and Central Sales Tax paid by exporters.