Written by Talent KAS

Related Topics: Government Policies & Interventions, Indian Economy


  • As part of third stimulus package for the economy, Finance Minister Nirmala Sitharaman has unveiled a set of government decisions to boost exports and the housing sector.
  • The decisions announced by the Minister follow two previous mega announcements designed to encourage private sector investment, and bring further stability into the banking system through several public sector bank mergers.
  • India will also now host annual mega shopping festivals in 4 places.

Snapshot of Key Decisions

Export Sector Package

  • A new attractive scheme for Remission of Duties or Taxes on Export Product (RoDTEP) was introduced to replace the existing Merchandise Exports from India Scheme (MEIS) from January 1, 2020.
  • The existing dispensation in textiles of MEIS and the old ROSL (Rebate of State Levies) will continue up to December 31, 2019.
  • Revised Priority sector lending norms for export credit will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector.
  • RoDTEP will more than adequately incentivise exporters than existing schemes put together. The revenue foregone is projected at up to ₹50,000 crore per year.
  • A fully electronic refund module for the quick and automated refund of input tax credits will become operational by the end of September, 2019.
  • To increase bank credit to exporters, the Export Credit Guarantee Corporation (ECGC) will expand the scope of its Export Credit Insurance Scheme to provide a higher insurance cover to banks that are lending working capital for exports.

Housing Sector Package

  • Rs 20,000 crore fund (Rs 10,000 crore from Government and roughly same amount from outside investors) would be set up to provide last mile funding for affordable and middle income housing.
  • This fund will be used to support projects that are non-NPA and non-NCLT projects and the objective is to focus on construction of unfinished units.
  • The fund would be set up as a Category-II AIF trust and would be professionally run with experts from housing and banking sector.
  • External commercial borrowing (ECB) guidelines will be relaxed to facilitate financing of home buyers who are eligible under the PMAY, in consultation with RBI.

Shopping Festivals

  • On lines of the popular Dubai Shopping Festival, annual mega shopping festivals in India will be organised in four places in four themes.
  • Focus of the shopping festivals will be gems and jewellery, handicrafts, yoga, tourism, textiles and leather.

Need for the Announcement

  • India had reported its weakest growth in more than six years at 5 per cent in the June quarter.
  • The economic slowdown has particularly been harsh on the automobile sector with domestic passenger vehicle sales having skidded for the 10th consecutive month in August 2019, registering a 31.57 percent decline.
  • Exports were one of the drivers of India’s economic growth in the past decade. Between 2006 and 2010, merchandise exports grew at a compound annual growth rate of 15.4%, compared to global export growth of 5.9% in the same period. In 2010-11, they grew 37.5%.
  • In contrast, they grew by a mere 9% in 2018-19 and according to the latest trade data, merchandise exports declined by 6% in August 2019.
  • In the real estate space, the number of unsold homes has increased while fast-moving consumer goods companies have reported a decline in volume growth and lending to job-creating MSMEs by banks have actually slipped.

Way Forward

  • Without enacting any major supply-side reforms like land and labour reforms that can raise potential growth, it is also hard to see how greater spending can raise growth for very long.
  • The government should aim higher by trying to push through long-pending structural reforms that can raise India’s growth trajectory to the next level.
  • The realty market requires a broad economic upturn to recover properly, while exports need a competitive edge sharpened by wider reforms that make space for high-quality stuff at low cost.
[Source: The Hindu, Hindustan Times]


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