FM unveils additional steps to boost economy

Finance Minister Pranab Mukherjee announced a few additional measures while replying to the debate on Union Budget in the Lok Sabha. The Lok Sabha approved the budget for the year ending March 31, 2010. The budget was introduced by Mukherjee in parliament on July 6. Mukherjee cut the interest rate on some home loans and reduced the tax burden for select industries, adding to the four stimulus packages already announced since December 2008 in a bid to bolster a sluggish economy. The Government will provide an interest-rate subsidy of 1% for loans of as much as Rs1mn provided the value of the home doesn't exceed Rs2mn, the Finance Minister said, announcing amendments to the budget.

"In the medium term, we must enhance internal demand," Mukherjee said. "The fiscal stimulus which we have provided to confront the situation has paid dividends." The Finance Minister also extended a tax break for companies engaged in building industrial parks by two years to March 31, 2011, and exempted companies engaged in the repair and maintenance of roads from paying service tax. "We have chosen the path of higher spending to ensure that we can have a reasonable growth rate in the current year and return to a higher growth trajectory," soon, Mukherjee said. India needs 4% agriculture growth to achieve a 9% economic growth, the Finance Minister said.

The Government also announced a tax holiday on profits from housing projects approved between April 1, 2007, and March 31, 2008, provided they are completed on or before March 31, 2012. "I expect the developers to pass on the benefit of tax holidays to the buyers of these houses," Mukherjee said.

The Indian economy is expected to maintain a growth rate of 6.7% in 2009-10, same as last fiscal, as some signs of pick-up are visible, the Finance Minister said. "We have ended 2008-09 at 6.7%. I do hope, this level of growth, we will be able to maintain (in 2009-10)," he said while commending the Finance Bill in the Rajya Sabha. He said although some signs of recovery are visible, it is too early to point out that whether they would be steady.

Mukherjee hoped the stimulus, both in terms of financial concessions, fiscal policy and the monetary measures announced by the RBI, will have its desired impact. The early signs of improvement in the Indian economy are seen despite no big recovery visible in the global economy, the Finance Minister said. Trillions of dollars would have been injected in Europe and North America. "But there is no immediate restoration of the global economy, he added.