The government is likely to announce early next week a series of measures to boost economic activity in the country. This includes cheap credit to exporters and low-cost housing as well as making available additional funds worth Rs 50,000 crore to the infrastructure sector.
There is also a possibility of the Reserve Bank of India announcing another set of cuts in key policy rates like the cash-reserve ratio and the repo rate.
According to government sources, these measures were discussed at a meeting of an apex panel of ministers, headed by Prime Minister Manmohan Singh and formed to deal with the economic slowdown. The sources added that though the broad contours of the package have been finalised, the finer points are yet to be put in place.
The government is likely to provide cheap credit to labour-intensive export sectors including textiles, leather, handicrafts, marine products and gems and jewellery. This could be provided through a two per cent interest subvention for export related loans. The move is likely to cost the government around Rs 1,000 crore.
The government is also likely to extend the period of post-shipment export credit from 90 days at present to about 180 days. Additional export relief measures may include increased duty drawback rates used by exporters to get back duties like excise paid on producing goods for overseas sales.
The sources said the government may also provide interest subvention for low cost housing. The maximum limit for such loans is likely to be Rs 10 lakh. In its deliberations earlier, senior government officials had found that more than 70 per cent of the housing loans were below Rs 7.5 lakh. This move is likely to generate industrial activity by creating demand for cement and steel.
The Planning Commission has also proposed a Rs 50,000-crore fund for the infrastructure sector. The fund will be operated through India Infrastructure Finance Company Ltd. This will ensure that infrastructure projects like airports, roads and power plants do not get stuck due to the lack of funds.
Today’s meeting was attended by RBI Governor Duvvuri Subbarao, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Home Minister P Chidambaram. Commerce Minister Kamal Nath, who is also a member, could not attend the meeting as he was in Madhya Pradesh.
