Indian govt announces third round of stimulus totalling $16bn

Indian govt announces third round of stimulus totalling $16bn

The government's 12-point Atmanirbhar Bharat 3.0 package involves an extra Rs 2.65 lakh crore in stimulus, bringing the total amount allocated to bolstering the economy since the pandemic's start to almost Rs 30 lakh crore or 15 per cent of gross domestic product.

Additional credit of up to 20 per cent of outstanding as on February 29, 2020, would be given to entities in these sectors, she said.

Sitharaman said an additional ₹65,000 crore will be provided for fertiliser subsidies over and above the ₹71,000 crore allocated in the Budget.

"We expect that the announcement will help generate jobs, oil the engine of the economy", said Naveen Kulkarni, chief investment officer at Axis Securities.

The industry body complimented the finance minister for the "huge Diwali bonanza" that will lift growth, employment, exports and make India part of the global value chains.

The government will spend 1.2 trillion rupees ($16.1 billion) on the latest stimulus program in addition to the 1.45 trillion rupees announced on Wednesday, taking the total stimulus announced so far including that by the central bank to 15% of gross domestic product, Sitharaman said.

She added that income tax relief will be provided to the developers and home buyers to boost the residential housing sector by increasing the differential from 10 per cent to 20 per cent.

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Sitharman announced a Rs 900 crore grant to the Department of Biotechnology for COVID-19 vaccine research. The companies will get a one-year moratorium on loans and four more years to repay the amount, she said. The move applies to primary sale of residential units valued up to Rs 2 crore. This is over and above Rs 8,000 crore already provided this year. "A total amount of almost 1.5-lakh crore rupees has been earmarked across sectors, for the next five years", Sitharaman said.

"In a significant demand booster for the residential real estate sector, the govt has decided to make amendments in the Income Tax Act to help home-buyers as well as developers", said Sitharaman. "This measure will reduce hardships and help in clearing the unsold inventory", Sitharaman said. Also, "the increase in circle rate and transaction value threshold... will remove a transaction hurdle and save tax, thereby increasing the opportunity for unbridled property purchase activity", he said. She earmarked Rs 6,000-crore for equity investment in the debt platform of National Investment and Infrastructure Fund (NIIF) and Rs 65,000-crore for subsidized fertilisers.

A Rs 18,000 crore additional outlay for the urban housing scheme will help complete real estate projects that would create jobs and boost the economy, she said.

The minister noted that prominent economists have suggested that the rebound has not come only due to pent-up demand but also because of "strong economic growth". The rate of interest charged by banks will not exceed 9.25 per cent.

The economy is expected to contract close to 10% in the fiscal year to March 2021.

The International Monetary Fund (IMF) has forecast that the Indian economy will shrink by 10.3 per cent in the year to March.

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