In order to stimulate the economy, hit by the global financial crisis, the government has announced major tax cuts across the board to boost demand and allocated additional funds and incentives for exports, housing, textile and infrastructure. A four per cent cut in ad-valorem duty across the board to boost additional spending, enhanced credit for exporters, along with a Rs 10,000 crore mop up for India Infrastructure Finance Company has been announced by the RBI.  

An official statement said, “In order to provide a contra-cyclical stimulus via plan expenditure, the government has decided to seek authorisation for additional plan expenditure of up to Rs 20,000 crore in the current year.” The public sector banks would shortly announce a package for home loan borrowers in two categories - up to Rs 5 lakh and between Rs 5-20 lakh, as part of the efforts to boost the housing sector.  

The automobile sector will benefit as government departments would be allowed to take up replacement of vehicles within the allowed budget. Further giving importance to infrastructure development, the government authorised India Infrastructure Finance Co Ltd (IIFCL) to raise Rs 10,000 crore through tax- free bonds by March 2009 and said it would be permitted to raise further resources. The statement stated, “In particular, these initiatives would support a PPP (Public-Private Partnership) programme of Rs 1, 00, 000 crore in the highways sector.”

In an attempt to boost exports, the government provided Rs 350 crore additional funds for export incentives; back-up guarantee to ECGC for up to Rs 350 crore, to be allowed refund of services in some areas. To boost collateral free lending to Micro and Small enterprises that are facing a credit crunch, the government doubled the current guarantee cover for loans of up to Rs 1 crore from the existing limit of Rs 50 lakh.

These announcements for the MSE sector comes a day after RBI announced a refinance facility of Rs 7,000 crore for Small Industries Development Bank of India to facilitate the flow of credit to such industries