In a bid to contain the impact of the global financial crisis on India, the government unveiled a Rs 30,000 crore package for the first four months of the year. The measure was taken to pump prime the economy with specific measures for various sectors. The amount was to be spent over the remaining four months on a host of areas such as exporters, housing, infrastructure and textiles. A four per cent cut in VAT was also announced to help the corporate sector in general. The measures came soon after RBI reduced its key rates.
The following were the highlights of the fiscal stimulus package:
- Plan, non-plan expenditure of Rs 300,000 crore in four months
- Across-the-board cut of four per cent in the ad valorem central value-added tax
- Interest subvention of two per cent on export credit for labour intensive sectors
- Additional allocations for export incentive schemes
- Full refund of service tax paid by exporters to foreign agents
- Incentives for loans on housing for up to Rs five lakh, and up to Rs 20 lakh
- Limits under the credit guarantee scheme for small enterprises doubled
- Lock-in period for loans to small firms under credit guarantee scheme reduced
- India Infrastructure Finance Company allowed to raise Rs 100 billion through tax-free bonds
- Norms for government departments to replace vehicles relaxed
- Import duty on naphtha for use by the power sector reduced to zero
- Export duty on iron ore fines eliminated
- Export duty on lumps for steel industry reduced to five per cent
