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Wednesday, August 12, 2009

Indian Measures to Counter Economic Recession


Ever since, the first signs of the recession began showing in India, the Government has come up with various incentives, apart from measures by RBI. The Central Bank has took some steps, such as reducing the benchmark lending rate; lowering cash reserve ratio (CRR); and easing lending norms for commercial banks to provide boost to the housing sector lending. To provide a stimulus to the export sector, RBI has enhanced the credit period for exporters from 6 to 9 months.

The Government, in its turn, plans to reduce sales tax by 4%, to be funded through USD 4 billion of Government spending. In the introductory speech (dated February 26, 2009) of the Commerce and Industry Minister on the announcement of Trade Facilitation Measures, following measures to combat the economic slowdown were discussed:

  • Interest subvention of 2% till December 31, 2009, for certain employment intensive sectors 
  • Additional funds of INR 1,200 Crore for Central Sales Tax/ Terminal Excise Duty/ Drawback refunds
  • Extension of Duty Entitlement Pass Book Scheme (for saving on Customs Duty) up to December 31, 2009
  • Restoration of Duty Entitlement Pass Book rates for all items at rates prevailing prior to November, 2008
  • Increase in Duty Drawback Rates on certain items effective September 1, 2008
  • Around INR 2,300 Crores have been provided through various existing schemes for cushioning the adverse impact of declining exports 
Since, the fiscal and monetary measures take approximately 8-12 months to bring about the desired effects, the impact will be fully visible from September 2009.

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