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India: Prime Minister Delivers Growth Pill to Boost Economy
Close on the heels of RBI stimulus package for economic growth, the Prime Minister, managing finance portfolio after the departure of Finance Minister P.Chidambaram, delivered diversified growth stimulus package to pull back the economy from the downturn it is experiencing.
The government today (7th Dec’08) announced a 4% cut in central value added (cenvat) tax at all levels. This will entail a loss of revenue of Rs.8700 crores for the remaining four months of this financial year. Additionally Rs.20000 crores have been earmarked for Infrastructure, Industry and Export segments.
As per the official statement, the excise duty on big cars have been reduced from 24% to 20% and for small cars it has been reduced to 8% from 12% at present. To provide impetus to cement industry, the ad valorem (meaning tax calculated as percentage of value of finished product) excise component has been reduced to 8% from 10% apart from reduction in cenvat.
In iron ore fines, the 8% export duty has been withdrawn and the levy of 15% on the export of the iron ore lumps has been slashed to 5% to provide special relief to iron ore industry which has been experiencing declining price from $143 in June’08 to about $50 per ton at present. The duties on cotton textiles and similar items have also been reduced to zero from 4% for export growth.
It is worthwhile to mention that the government has reduced prices of diesel by Rs.2 and petrol by Rs.5 on 5th Dec’08 and is likely to reduce it further in the coming months if the international crude continues to rule lower.
The industrial circle was optimistic about demand boost after the various duty cuts and cenvat reduction along with the RBI move to increase liquidity. However as usual, a small corporate section was not so optimistic. In fact Pradeep Jain, Chairman of Parsvnath Developers said, “It is an eye wash, it is not going to spur demand.”
Tags: Growth Package , Growth Pill , Economic Ill
