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| States can borrow Rs 30,000cr in addition to budgeted loans | | | Agencies
New Delhi, Jan 3: The second stimulus package announced by the government has taken the onslaught into the enemy camp, namely, slowdown in demand and an unprecedented loan drought for the corporate sector.
Look at what has been proposed for the auto sector, especially trucks and buses, public sector banks will provide special credit to finance companies that give out loans for buying trucks, states to get funds from the Centre’s urban development schemes to buy buses, and fleet owners can save on taxes if they buy trucks between January 1 and March 31.
Similarly, for the housing sector, there is a host of measures apart from the RBI’s rate cuts which are expected to translate into cheaper housing loan rates, integrated townships can now access foreign loans, and Delhi will cajole states to release land for lower and middle income housing schemes so that there is a concerted increase in activity. These come over and above the earlier decisions which provided concessional rates for loans up to Rs 20 lakh.
There is an attempt to shift some of the expenditure burden from the Centre to the states in the hope that money spent by the states on local projects will also help in demand invigoration. States have been allowed to borrow Rs 30,000 crore extra, in addition to their budgeted loans, from the market.
The government has tried to address the loan famine faced by Indian companies. For one, it has made it easier for them to access foreign currency loans by removing the ceiling on interest rates. However, there are still no indications whether international banks have got back into a lending mood. Second, foreign investors have been allowed to invest more in rupee bonds floated by Indian companies — it is now $15 billion against $6 billion earlier.
Third, credit targets for all PSU banks are being revised upwards. In addition, it is being hoped that the fusillade of rate cuts and repeated money pumping by RBI might finally unclog the economy’s financial arteries.
Some domestic sectors such as cement, TMT bars and structurals, zinc and ferro alloys, have got a special leg-up after government has made it slightly more expensive to import these items. This has been achieved by re-imposing duties that were waived briefly when the government was combating inflation.
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