An extra dose of Rs 17,400 crore in social spending and a fiscal package, spearheaded by an interest subsidy of 2.5 per cent to fix home loan interest at 9.5 per cent, are likely to be announced on Saturday to boost the slowing Indian economy.
At a meeting with the Cabinet Secretary today, it was decided to push for an interest rate subvention on new home loans which would, in turn, provide the stimulus to the housing and construction-related sectors such as steel and cement, said sources.
The subsidy would be available for home loans below Rs 25 lakh but sources said that the cut-off point would be decided by the high-powered committee on economic crisis headed by Prime Minister Manmohan Singh.
Also being considered is a four-percent excise duty cut on cars, bus and trucks to bring it to 8-10 percent with a possible reduction in licensing controls on steel imports to impart impetus to the automobile sector.
The countervailing duty on cement of Rs 350 per tonne that was abolished last year would be re-imposed to shelter domestic producers facing a lower capacity utilization due to imports from Pakistan that are cheaper by at least Rs 30 to Rs 40 per bag.
Besides the economic reasoning that Pakistan provides a lion's share of India's imports of about 1.5 million tonnes, the second rationale put out was the attack in Mumbai by militants who are sheltered and supported by Islamabad, sources said.
The apex committee is also likely to approve abolishing the 8 percent ad valorem export duty on iron ore fines and reduce the 15 percent export duty on iron ore lumps to improve the prospects of the iron ore exporters as the proposal from the Federation of Indian Mineral Industries has been agreed to by both Commerce and Finance Ministries.
As for social spending, the committee of secretaries has agreed to the Planning Commission's proposal to a second supplementary demand of Rs 17,400 crores for UPA government's key programmes in the coming parliament session due to "highly exceptional circumstances." These, the Commission said, were programmes with the absorptive capacity, and that any new launch would take time in getting off and not get implemented during the current fiscal. The proposal has been reviewed with other ministries, it said.
The Indian economy which maintained a healthy clip of 9 per cent-plus growth rate on an average over the last four years has lost steam and slipped to 7.9 per cent and 7.6 per cent in the first two quarters of the current fiscal.