Update: Turns out it’s 30,000 cr., not 300,000 cr. Suitably edited – my apologies.
India joins the global stimulation exercise.
- Total spending in the next four months, till end March 09, will be 300,000 cr. This is plan and non plan put together.
- Some home loan sops – for 5 lakh and 20 lakh upper limits, which is going to be announced. Someone now needs to find a house that sells for less than 5L.
- IIFCL – a government infrastructure finance company, will raise 10,000 cr. through tax-free bonds, to support a 100,000 cr. investment in highways.
- Export sops: 2% interest concession for exports in “labour-intensive” sectors like textiles, leather and SMEs.
- Ad-valorem cenvat duty cut of 4% across the board.
- SMEs will be able to get 50% guarantee on loans of upto 1 crore (earlier 50 lakhs) under the Credit Guarantee Scheme and the period of such loans has been cut to 18 months (from 24) to encourage lending.
- Import duty on Naptha for power, and export duty on iron ore fines cut to zero. Export of iron ore lumps is now down to 5%.
Read the full text of the announcement.
We’ll have to see how it pans out. Definitely positive for iron ore exporters like Sesa Goa, MMTC, NMDC. Positive for small scale textile exporters, which have a good deal with the rupee hitting 50 too. The cenvat duty cut helps literally everyone. Highways sops are good for some of the infra providers, but the PPP model doesn’t always work with a lousy stock market. Expect the market to perk up slightly before it goes back to sleep.
The plan, overall, doesn’t help much.We might need to do a black-money-disclosure scheme and a huge income tax cut – probably after elections – to get some of that black money back into the market. Plus, dramatically increase enforcement by hiring compliance offers and increasing spending on data mining to find and investigate all tax defaulters.
This is not a stimulus package, really. It’s like using a very expensive pencil to poke an elephant. Sure, you’re poking, but the animal couldn’t be bothered.