Second stimulus package on the cards to boost growth

NEW DELHI: A second stimulus package is definitely on its way, and will provide sops to the automobile, housing and steel sectors. Further cuts in the central bank���s policy rates are also being considered.

The committee of secretaries (CoS) on economic crisis is examining proposals like increasing the limit for low interest-rate housing loans from Rs 20 lakh to Rs 30 lakh, increasing the tax rebate on home loans, reducing car and two-wheeler loan rates by 2% (from the current 12-14%), increasing depreciation and ensuring faster disbursal of Cenvat credit for the steel sector.

Government officials said real estate sops were contingent on the slashing of property prices. The CoS will meet again on Friday to finalise the proposal. The prime minister���s apex panel may take it up on Saturday for a final decision. The Centre is also looking at safeguards to protect chemical, aluminium and tyre manufacturers against cheap imports, especially from China.





The new package could also include monetary measures such as cuts in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) by RBI. CRR, down to 5.5% from 9% in August 2008, impounds cash with RBI while SLR mandates banks to keep a specified proportion of their deposits in government securities.

Big push

Increase limit for low-interest housing loans from Rs 20 lakh to Rs 30 lakh

Raise tax rebate on home loans from Rs 1.5 lakh to Rs 2.5 lakh per annum

Reduce car and two-wheeler loan rates by 2%

Increase depreciation and hasten disbursal of Cenvat credit for steel sector

Safeguards for chemical, aluminium and tyre manufacturers against cheap imports

Stimulus package: Changes in direct taxes not on cards


The package comes in the backdrop of recent decline in industrial production and exports. The first installment, announced by the government on December 7, was estimated at over Rs 30,000 crore.

Industry has also represented to the committee a set of demands relating to lower direct taxes: a hike in the income tax exemption limit from Rs 1.5 lakh to Rs 2 lakh and a cut in corporate tax rate from 30% to 25%. Any change in direct taxes calls for legislative change, which is a remote possibility in current circumstances.

The first stimulus package had left realtors unhappy: they complained that the existing stock of unsold homes cost much more than Rs 20 lakh, so that the interest rate concession on loans up to Rs 20 lakh would not help their sale. ���That is why we are now looking at increasing the limit of Rs 20 lakh to Rs 30 lakh,��� an official said. Public sector banks are now offering homes loans up to Rs 5 lakh at a rate of 8.5% and up to Rs 20 lakh at 9.25%.