Union finance minister Nirmala Sitharaman today – Saturday, Sep 14 – announced a slew of measures to boost the economy, focusing mainly around steps to promote exports and the housing sector.
Informing the media about the third part of the stimulus package for the economy, the finance minister said that the industrial production and fixed investment have shown signs of revival. Sitharaman also said that CPI or retail inflation has been kept under 4 per cent, adding that several NBFCs are benefiting from partial credit guarantee schemes announced earlier.
For incentivising exports, finance minister Sitharaman announced a new scheme — Remission of Duties or Taxes on Export Product (RoDTEP) – estimated to cost Rs 50,000 crore to the exchequer.
She said RoDTEP will replace the existing incentive schemes and “will more than adequately incentivise exporters than the existing schemes put together”. The minister said the revenue foregone towards the scheme is projected at Rs 50,000 crore.
The announcement comes in the backdrop of India’s merchandise exports declining by 6.05 per cent to $26.13 billion in August compared to the year-ago month.
The minister also said there will be a fully automated electronic refund route for input tax credits (ITC) in GST. This will be implemented by the month-end. The move, she added, is aimed at quick and automated refunds of ITC.
She also announced other steps including simplification of GST rules to higher insurance cover to banks lending for exports. Announcing easier rules for lending to priority sectors, Nirmala Sitharaman said the measures could lead to export credit rising by Rs. 36000 crore to Rs. 68,000 crore.
“The measures have been periodically formulated based on the inputs that we obtained during nationwide consultations that we are doing,” said the Finance Minister. The steps to promote exports come at a time the government intends to more than triple the country’s annual exports to $1 trillion in the next five years.
“Each time we are making a clear attempt to also connect with the previous announcements,” the Finance Minister said, as she explained the measures through a presentation. The government had earlier announced steps such as a withdrawal of higher taxes on foreign investors – as announced in the Budget – and a mega merger plan for 10 state-run banks in a bid to push investments and growth.
The premium incidence for the Ministry of Micro, Small and Medium Enterprises (MSMEs) will be moderated suitably, she said.
Sectors such as textiles which enjoy incentives up to 2 per cent under the Merchandise Exports from India Scheme will transit into the RoDTEP scheme from January 1, the Finance Minister said.
Sitharaman said India would launch four mega shopping festivals like the ones organised in Dubai. These shopping festivals would be held at four locations across the country.
These festivals would be held on specific themes such as gems and jewellery, yoga, tourism and textiles and leather. The first of these festivals would be held in March 2020.
The Gulf emirate organises several events such as the Dubai Food Festival and the month-long Dubai Shopping Festival. The shopping festival has been on for a little more than two decades and had been originally launched to increase Dubai’s retail trade. It was later promoted as a tourist attraction.
Official data this week showed the country’s exports dropped 6.05 per cent to $26.13 billion last month. Still, India’s trade deficit narrowed to $13.45 billion in August from $17.92 billion in the corresponding period a year ago thanks to a 13.45 per cent fall in imports to $39.58 billion.
On Thursday, Commerce Minister Piyush Goyal had said that the ongoing trade disputes between the US and China offer a window of opportunity for domestic manufacturers to make a mark in export markets.
For housing sector, the finance minister announced a Rs. 10,000-crore special window to provide last-mile funding for completion of ongoing housing projects which are not NPAs or facing bankruptcy proceedings under NCLT. Sitharaman said while the government will contribute Rs 10,000 crore for the special window, roughly the same amount is expected from outside investors.
This window will help in completion of affordable and middle income housing projects. The fund will be managed by professionals, the minister said.
“The objective is to focus on construction of unfinished units,” she said. “This will benefit roughly 3.5 lakh projects across the country,” the finance minister added.
Sitharaman also said the interest rate on housing building advance will be lowered and linked to the 10-year G-sec yields.
The government of India on the lines of the National Investment and Infrastructure Fund may contribute to the Rs 10,000 crore fund for the special window. Rest of the funds will be from LIC and other institutions and private capital from banks/sovereign funds etc.
Among other announcements, Sitharaman also relaxed guidelines of External Commercial Borrowings to facilitate financing of home buyers. This will be done in consultation with the Reserve Bank of India which will help identify eligible beneficiaries under the Pradhan Mantri Awas Yojna (PMAY).
In addition, the interest rate on House Building Advance shall also be lowered and linked with the 10 year G Sec Yields.
“Government servants contribute to a major component of demand for houses. This will encourage more government servants to buy new houses,” the finance minister said.
The economic growth hit a six-year low of 5 per cent for the first quarter of the current fiscal.
Over the past weeks, the government has announced a slew of economic measures including the mega bank mergers, withdrawal of higher surcharge on foreign portfolio investments (FPIs) and domestic investors, sops for infrastructure, revival package for the auto industry and relief for startups.