Commerce ministry may shuffle stimulus among sectors

While tobacco, spices, man-made yarn, gems, chemicals and jewellery have shown satisfactory export growth in the past few months, textiles, handicrafts, carpet, engineering goods are still reeling under the impact of global crisis.

The commerce and industry ministry may withdraw incentives offered to certain export-oriented industries and reallocate them to those that are struggling for survival after a review in April, reports PTI.

"...Decision for any kind of change in the stimulus measures for the sectors coming out from the impact of global financial meltdown will be taken after 31st March," minister of state for commerce and industry Jyotiraditya Scindia told reporters at an Assocham function in New Delhi.

While tobacco, spices, man-made yarn, gems, chemicals and jewellery have shown satisfactory export growth in the past few months, textiles, handicrafts, carpet, engineering goods are still reeling under the impact of global crisis.

The ministry had given enhanced assistance for exploring new markets to exporters and extension of duty refund scheme till December 2010, besides other sops.

On the Budget expectations, Mr Scindia said that he has requested finance minister Pranab Mukherjee to at least retain the previous year’s allocation of Rs3,652 crore for the ministry.

Sources said that as exports have started showing signs of recovery and industrial production too has picked up significantly, the finance ministry may start withdrawing stimulus measures, resulting in lower budgetary allocation for the commerce and industry ministry.

The government had provided over Rs1.80 lash crore as part of three stimulus packages to prop up the economy against the recent global downturn.

The index of industrial production (IIP), an indicator of industrial activity in the country, zoomed 16.8% in December compared to a contraction of 0.2% during the corresponding month a year ago.

After falling for 13 straight months, exports grew by 18.2% in November 2009. Exports growth was 9.3% in December 2009 and 11.5% in January.

The Prime Minister's Economic Advisory Council (PMEAC) has forecast a 12% growth, to $88 billion, in India's exports in the second half of the current fiscal.
Exports were valued at $81 billion in the first six months of 2009-10; exports during October-March 2008-09 were estimated at $78.5 billion.
 

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Govt to withdraw stimulus after assessing impact on recovery

Once the adverse impact of the global shocks on the Indian economy is overcome, the process of fiscal consolidation would resume, minister of state for finance Namo Narain Meena said in a written reply to the Rajya Sabha

The Indian government on Tuesday said it would withdraw the stimulus package only after assessing its impact on the economic recovery, reports PTI.

"The decision on the rollback of fiscal stimulus measures, including the nature, pace and sequence would be based on the emerging economic situation and after careful consideration of the impact of the same on the recovery process," minister of state for finance Namo Narain Meena said in a written reply to the Rajya Sabha.

The finance ministry's statement comes in the backdrop of the ongoing debate on whether or not to roll back the sops given to the industry during the slowdown.
While the industry wants the stimulus package to continue, experts feel since the economy is back of the growth path, it is time the stimulus was phased out partially. The economy is expected to grow by over 8% during 2010-11.

Mr Meena, too, in reply to other questions, said, "The expansionary fiscal stance is a short-term measure to address demand slowdown in the economy and to minimise the adverse impact of the global financial crisis."

"Once the adverse impact of the global shocks on the Indian economy is overcome, the process of fiscal consolidation would resume," he added.
Mr Meena further said monitoring the emerging macroeconomic situation and calibrating policies to mitigate the adverse impact and restore growth momentum is an ongoing process.

The stimulus measures announced by the government in three tranches in December 2008 and then in January and February 2009 were both sector-specific and macro-economic in nature, he said.

Some of the key sectors for which specific measures were put in place include exports, especially textiles, leather and gems and jewellery; medium, small and micro enterprises; infrastructure and housing.

The Budget for 2009-10, presented on 6 July 2009, envisaged a continuance of the process of fiscal expansion and the fiscal deficit was placed at Rs4,00,996 crore for the full year (amounting to 6.8% of the GDP).

The medium-term fiscal policy statement presented to Parliament along with the Budget for 2009-10 estimates that the Centre's fiscal deficit would decline to 5.5% of the GDP in 2010-11 and further to 4.0% of the GDP in 2011-12.
 

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