Rejig Of Stimulus Sops To Export Sectors Likely (24-Feb-2010)
The Minister of State for Commerce and Industry, Jyotiraditya Scindia hinted at reorganizing of several incentives given under many stimulus packages to fragile sectors still facing weak global demand.
The result for a change in the stimulus measures for the sectors recovering from the impact of global crisis will be taken after March 31 after a review of the working of the various incentives.
However, the Union Minister for Commerce and Industry, Anand Sharma had already hinted at re-look at the incentives given to various sectors.
He also declared that the Government was duty-bound to protect and promote the interests of the labour-intensive units.
Textiles, handicrafts, carpet and engineering goods are still suffering under the impact of crisis
While, tobacco spices, man-made yarn, gems, chemicals and jewellery have shown acceptable export growth in the past few months.
Meanwhile, besides other sops, the Ministry had given improved assistance for exploring new markets to exporters and extension of duty refund scheme till December 2010.
Mr. Scindia said his Ministry had urged Finance Minister Pranab Mukherjee to at least retain the allocation of Rs. 3,652 crore for the Ministry as in the previous year.
Moreover, the government had provided over Rs. 1.80 lakh crore as part of 3 stimulus packages to boost the economy against global crisis.
After declining for 13 straight months, exports increased by 18.2% in November 2009 while export growth was 9.3% in December and 11.5% in January 2010.
Previously, Commerce and Industry Minister Anand Sharma stated that it would be a blunder to take back the fiscal stimulus to the labour-intensive sectors.
Mr Anand Sharma said this hardly three days before the Union Budget.
He said that there are several labour-intensive sectors which still have problems and are doing badly and it would be a mistake to withdraw support to those sectors.
Earlier, India Inc stated the global economy is yet to recover from the affect of the downturn.
It did not agree with the proposal of the Prime Minister''s Economic Advisory Council (PMEAC) on taking back stimulus.
CII said that there is a need to carry on with the stimulus measures for some time as the global economy yet to revive.
Additioanally, the Federation of India Export Organizations (FIEO) asked the government to continue the incentives for at least another one and a half years.
This is in the midst of speculations that stimulus measures could be rolled back in the forthcoming Budget.
India''s exports started recovering from November after a 13-month contraction due to the slowdown in demand in the western markets.
However, Prime Minister''s Economic Advisory Council (PMEAC) Chairman C Rangarajan stated that in the upcoming Budget for the withdrawal of stimulus, the government should come out with a roadmap.
When asked whether the Budget should start the process of exit, he said that what is required is a roadmap towards normalization.
He also said the stimulus exit has to be a gradual process as the word rollback is too strong in expression.
Earlier, Prime Minister''s Economic Advisory Council chairman C Rangarajan stated that the exit measures must be gradual, in the midst of speculation of the government taking back stimulus.
He said that exit measures should be regulated in a manner that stimulus in the economy should continue while at the same time, some adjustments will be made to bring down fiscal deficit.
Ficci warned it will be dangerous for economic growth and employment if the fiscal incentives given to boost economy were withdrawn.
This was said by it since RBI had earlier advice to the government to take back some of the stimulus measures.
Ficci''s comments come at a time when everyone is counting days for the big day of Budget, likely on February 26.
In economics, fiscal policy is the use of government spending and revenue collection to influence the economy. Fiscal policy can be contrasted with the other main type of economic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money.
The possible problems with fiscal stimulus include the time lag between the implementation of the policy and detectable effects in the economy, and inflationary effects driven by increased demand. In theory, fiscal stimulus does not cause inflation when it uses resources that would have otherwise been idle.
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