India Cuts Home Loan Rates, Some Taxes to Boost Growth Further
July 27 (Bloomberg) -- India's Finance Minister Pranab Mukherjee today lowered the interest rate on some home loans and reduced the tax burden for select industries, adding to four stimulus packages to revive a slowing economy.
The government will provide an interest-rate subsidy of 1 percent for loans of as much as 1 million rupees ($20,800) given for homes that don't cost more than 2 million rupees, Mukherjee said, announcing amendments to the budget that was approved by parliament today.
The stimulus comes after Mukherjee's July 6 budget that provided more funds for building roads, ports, utilities and reduced the tax burden on individual incomes to buoy demand and spur an economy growing at the slowest pace since 2003.
The central bank, which has reduced interest rates six times since October last year, will review monetary policy tomorrow in Mumbai.
"In the medium term, we must enhance internal demand," Mukherjee said, replying to the budget debate in parliament in New Delhi today. "The fiscal stimulus which we have provided to confront the situation has paid dividends."
India also extended a tax break for companies engaged in building industrial parks by two years to March 31, 2011, and exempted companies engaged in the repair and maintenance of roads from paying service tax.
India's $1.2 trillion economy may expand 7 percent in the year to March 2010, the finance minister said July 6. Higher government spending resulted in the Indian economy stabilizing in the first quarter, maintaining the 5.8 percent pace of expansion recorded in the preceding three months.
Central Bank's Forecast
India's economy may grow at a faster pace than earlier forecast this year, the central bank said today.
Asia's third-largest economy may expand 6.5 percent in the year ending March 31, the Reserve Bank of India said, citing a survey of eight estimates it conducted in June from agencies including the World Bank and the Asian Development Bank. The survey in March had estimated a 5.7 percent gain.
"We have chosen the path of higher spending to ensure that we can have a reasonable growth rate in the current year and return to a higher growth trajectory," soon, Mukherjee said.
India needs 4 percent farm growth to achieve a 9 percent economic growth, the minister said.
India's economy grew 6.7 percent in the year to March 2009, the slowest pace of expansion since 2003. Growth averaged 8.5 percent in the previous five years.
Mukherjee eased the tax burden on consumers and companies and boosted government spending to increase rural jobs in his July 6 budget to protect the economy from the impact of the worst global economic recession since the Great Depression.
The government also announced a tax holiday on profits from housing projects approved between April 1, 2007, and March 31, 2008, provided they are completed on or before March 31, 2012.
"I expect the developers to pass on the benefit of tax holidays to the buyers of these houses," Mukherjee said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net .
July 27 (Bloomberg) -- India's Finance Minister Pranab Mukherjee today lowered the interest rate on some home loans and reduced the tax burden for select industries, adding to four stimulus packages to revive a slowing economy.
The government will provide an interest-rate subsidy of 1 percent for loans of as much as 1 million rupees ($20,800) given for homes that don't cost more than 2 million rupees, Mukherjee said, announcing amendments to the budget that was approved by parliament today.
The stimulus comes after Mukherjee's July 6 budget that provided more funds for building roads, ports, utilities and reduced the tax burden on individual incomes to buoy demand and spur an economy growing at the slowest pace since 2003.
The central bank, which has reduced interest rates six times since October last year, will review monetary policy tomorrow in Mumbai.
"In the medium term, we must enhance internal demand," Mukherjee said, replying to the budget debate in parliament in New Delhi today. "The fiscal stimulus which we have provided to confront the situation has paid dividends."
India also extended a tax break for companies engaged in building industrial parks by two years to March 31, 2011, and exempted companies engaged in the repair and maintenance of roads from paying service tax.
India's $1.2 trillion economy may expand 7 percent in the year to March 2010, the finance minister said July 6. Higher government spending resulted in the Indian economy stabilizing in the first quarter, maintaining the 5.8 percent pace of expansion recorded in the preceding three months.
Central Bank's Forecast
India's economy may grow at a faster pace than earlier forecast this year, the central bank said today.
Asia's third-largest economy may expand 6.5 percent in the year ending March 31, the Reserve Bank of India said, citing a survey of eight estimates it conducted in June from agencies including the World Bank and the Asian Development Bank. The survey in March had estimated a 5.7 percent gain.
"We have chosen the path of higher spending to ensure that we can have a reasonable growth rate in the current year and return to a higher growth trajectory," soon, Mukherjee said.
India needs 4 percent farm growth to achieve a 9 percent economic growth, the minister said.
India's economy grew 6.7 percent in the year to March 2009, the slowest pace of expansion since 2003. Growth averaged 8.5 percent in the previous five years.
Mukherjee eased the tax burden on consumers and companies and boosted government spending to increase rural jobs in his July 6 budget to protect the economy from the impact of the worst global economic recession since the Great Depression.
The government also announced a tax holiday on profits from housing projects approved between April 1, 2007, and March 31, 2008, provided they are completed on or before March 31, 2012.
"I expect the developers to pass on the benefit of tax holidays to the buyers of these houses," Mukherjee said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net .
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