Date:03/01/2009 URL: http://www.thehindu.com/2009/01/03/stories/2009010356641600.htm

Business

Industry welcomes stimulus package

Special Correspondent

‘Will bring down lending rate and add liquidity to banks’

‘Restoration of DEPB scheme will improve the competitiveness of exporters.’

NEW DELHI: Major federations of industry and commerce welcomed the second stimulus package announced on Friday describing it as a set of positive measures aimed at providing relief to all sectors and help give a boost to the growth of the economy.

The Federation of Indian Chambers of Commerce and Industry (FICCI) Secretary General, Amit Mitra, said that by combining monetary and fiscal measures, the package sought to address a number of concerns and restoring business confidence.

The reduction in interest rates, infusion of additional liquidity, aid to export sector, boost to infrastructure sector and easier access to ECBs (external commercial borrowings) and FIIs (foreign institutional investors) were expected to give a boost to the economy.

Underlining that these measures would bring down the lending rate and the reduction in cash reserve ratio (CRR) was expected to add to the banks’ liquidity, Mr. Mitra, however, hoped that banks would lend to the corporate bodies rather than invest in government securities.

The restoration of duty drawback rates for select sectors and the extension of Duty Entitlement Pass-Book (DEPB) scheme for one complete year would improve the competitiveness of exporters.

FICCI expected infusion of foreign funds with the removal of interest cap on ECB and lifting of ceiling on foreign investment in corporate bonds from $6 billion to $15 billion.

Associated Chambers of Commerce and Industry of India (Assocham) Secretary General D. S. Rawat said that the government was working in the right direction but said that it fell short of his expectations. The chamber had hoped for a Rs. 1 lakh-crore package as against the Rs. 20,000 crore to support infrastructure and its social security schemes. He welcomed the across the board cut of 4 percentage points in ad-valorem Cenvat rate.

Mr. Rawat, however, felt that the CRR reduction should have had been on a par with the reverse repo rate.

The Confederation of Indian Industry (CII) Director General, Chandrajit Banerjee, welcomed the RBI’s action as an important move providing more credit in the system and bringing down the cost of credit to the relief of sectors whose demand were affected by high interest rates and were also constrained by high cost of borrowing for their operations.