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Economy Government of India has announced an economic stimulus package on Sunday, 7th December 2008. The package is attached. The following are the measures that will impact the Textile and Clothing industry. 1. Additional funds of Rs. 1400 crore have been sanctioned for TUFS. This is in addition to Rs. 300 crore which had been sanctioned recently. The total of Rs. 1700 crore is expected to meet the backlog for the period upto September 2008. 2. An interest subvention of 2 per cent has been reinstated for export credit, out of 4 per cent that had been withdrawn from October 2008. It is not clear whether the 2 per cent subvention will be available prospectively or from 1st October 2008, when the 4 per cent subvention was withdrawn. 3. Rs. 1100 crore has been provided for refund of CST and terminal excise duty for all products. This is expected to meet the current pendency for all textile and clothing units in CST, TED refunds. 4. Service tax on foreign agents’ commission will now be refunded upto 10 per cent of FOB value of exports instead of 2 per cent allowed earlier. 5. Refund of Service Tax on output services will now be available to units availing duty drawback also. 6. There will be across the board reduction of 4 per cent in Excise Duty. In the case of Textiles and Clothing units this will apply to machinery, manmade fibres, dyes & chemicals and other products where excise duty is currently being paid. 7. In addition, some of the general provisions like Rs. 350 crore for export incentives and Rs. 350 crore worth of Government guarantee to ECGC will also have some implications for the Textiles and Clothing industry. Chairman, CITI has issued a Press Release on the response of CITI to the Package. A copy of the release is attached. Yours faithfully, (D.K. NAIR) Secretary General Encl.: As above cc: Member Associations / Associate Members / Corporate Members
issue of oil and fertilizer bonds and higher levels of food subsidy. December 07. The first priority was to re-assure the people of the stability of the financial system in general and of the safety of bank deposits in particular. Access to external commercial borrowings has also been liberalised so that borrowers capable of accessing funds from abroad are allowed to do so. These steps have ensured that the financial system is functioning effectively without suffering the kind of loss of confidence experienced in the industrialised world. the most recent of which was announced on Saturday when both the repo rate and the reverse repo rate were cut by 100 basis points. In addition. On the monetary side. These measures in the area of money and credit are being supplemented by fiscal measures designed to stimulate the economy. the following steps are being taken: . the government had consciously allowed the fiscal deficit to expand beyond the originally targeted level because of the loan waivers. Interest rate reductions have also been signalled by reductions in the repo and reverse repo rates. In recognition of the need for a fiscal stimulus. Having assured stability of the system.Press Information Bureau Government of India Sunday. the Government has focussed its attention on countering the impact of the global recession on India's economic growth. The banks are being encouraged to counter what might otherwise become self-fulfilling negative expectations by enhanced lending to support economic activity. To this end. 2008 Ministry of Finance GOVERNMENT ANNOUNCES MEASURES FOR STIMULATING THE ECONOMY 17:1 IST The Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem. Banks have been provided adequate liquidity through a series of reductions in the CRR and additional flexibility in meeting the SLR requirement. the RBI has sought to pump sufficient liquidity into the banking system to enable bank credit to meet the expanded requirements of the economy keeping in mind the contraction in credit from non-bank sources. steps were taken to infuse liquidity into the banking system and also to address problems being faced by various non-bank financing companies.
4000 crore for the National Housing Bank. In addition.. taking plan and nonplan expenditure together is expected to be Rs.350 crore will be made. . so that the pace of expenditure is maintained. an across-the-board cut of 4% in the ad valorem Cenvat rate will be effected for the balance part of the current financial year on all products other than petroleum and those where the current rate is less than 4%. Housing Housing is a potentially very important source of employment and demand for critical sectors and there is a large unmet need for housing in the country.5 lakhs and (2) Rs 5 lakh-Rs 20 lakh. Reduction in Cenvat: As an immediate measure to encourage additional spending. the Government has decided to seek authorisation for additional plan expenditure of upto Rs 20. In addition.e. i.1100 crore will be provided to ensure full refund of Terminal Excise duty/CST.000 crore. one of the areas where plan expenditure can be increased relatively easily is the Indira Awas Yojana. v) Exporters will be allowed refund of service tax on foreign agent commissions of upto 10 percent of FOB value of exports. especially for middle and low income groups. leather. iii) An additional allocation for export incentive schemes of Rs. 4. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory. steps are being taken to ensure full utilisation of funds already provided. Plan Expenditure: In order to provide a contra-cyclical stimulus via plan expenditure. Measures to Support Exports i) Pre and post-shipment export credit for labour intensive exports.350 crore to enable it to provide guarantees for exports to difficult markets/products. The total spending programme in the balance four months of the current fiscal year. They will also be allowed refund of service tax on output services while availing of benefits under Duty Drawback Scheme.1. carpets and handicrafts). iv) Government back-up guarantee will be made available to ECGC to the extent of Rs. textiles (including handlooms. As a further measure of support for this sector public sector banks will shortly announce a package for borrowers of home loans in two categories: (1) upto Rs. gems & jewellery. 2. marine products and SME sector is being made more attractive by providing an interest subvention of 2 percent upto 31/3/2009 subject to minimum rate of interest of 7 percent per annum ii) Additional funds of Rs. The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year.300. The Reserve Bank has announced that it will shortly put in place a refinance facility of Rs.000 crore in the current year. 3.
1400 crore will be made to clear the entire backlog in TUF Scheme. small and micro enterprises (MSMEs) sector which is critical for employment generation. In this way it is expected that IIFCL resources used for refinance can leverage bank financing of double the amount. Government has decided to authorise the India Infrastructure Finance Company Limited (IIFCL) to raise Rs. 8. (b) Import Duty on Naphtha for use in the power sector will be eliminated.10. (a) To boost collateral free lending. 6.100. (c) Government will issue an advisory to Central Public Sector Enterprises and request State Public Sector Enterprises to ensure prompt payment of bills of MSMEs. in relaxation of extant economy instructions. Depending on need. In order to support financing of such projects. to encourage banks to cover more loans under the guarantee scheme.7000 crore for SIDBI which will be available to support incremental lending.000 crore through tax-free bonds by 31/3/2009. These projects may experience difficulty in reaching financial closure given the current uncertainties in the financial world. In addition. the following steps are being taken.1 crore with guarantee cover of 50 percent. Infrastructure Financing A large number of infrastructure projects are now being cleared for implementation in the Public Private Partnership mode. . RBI has announced a refinance facility of Rs. the current guarantee cover under Credit Guarantee Scheme for Micro and Small enterprises on loans will be extended from Rs. (b) The lock in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months.000 crore in the highways sector. Textiles (a) An additional allocation of Rs.5. In particular. (b) All items of handicrafts will be included under 'Vishesh Krishi & Gram Udyog Yojana'. 7. Easing of credit conditions generally should help PSUs to make such payments on schedule. MSME Sector The Government attaches the highest priority to supporting the medium. these initiatives will support a PPP programme of Rs. particularly in highways and port sectors. either directly to MSMEs or indirectly via banks. To facilitate the flow of credit to MSMEs. (c) Export duty on iron ore fines will be eliminated and on lumps will be reduced to 5%.50 lakh to Rs. Others (a) Government departments will be allowed to take up replacement of government vehicles within the allowed budget. IIFCL will be permitted to raise further resources by issue of such bonds. NBFCs and SFCs. These funds will be used by IIFCL to refinance bank lending of longer maturity to eligible infrastructure projects.
The Government is keeping a close watch on the evolving economic situation and will not hesitate to take any additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity. *** RCJ/NNK .
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