Exports may get boost in second stimulus package

The centre is on verge of announcing a second economic stimulus package today in the backdrop of a fall in exports for the second month in a row by 2 per cent and rising trade deficit (See: India's April-November trade deficit zooms to $84.34 billion).

Acording to reports, Montek Singh Ahluwalia, deputy head of Planning Commission, will hold a news conference at 6:00 pm to announce details of the new package.

Significantly the package will be announced on Friday evening after market closing hours, and the full impact of the package on the stock markets will not be felt till Monday morning. However some teasers will come in from the ADR markets in the US.

Last week, Ahluwalia had said that while the second stimulus plan will be relevant for the current fiscal (See: Second stimulus plan in days; package for 2009-10 on anvil: Ahluwalia), implementation of the 2009-10 stimulus plan would be incumbent on the new government that takes office after the elections due next year.  

Ahluwalia said the government could still announce its intentions in the `vote-on-account' in Parliament, ahead of the election process.

But, he said, while preparing a fiscal package is important, the main thing is to make sure that expenditure that has already been provided, and the new expenditure, is made.

The new package is likely to be sector specific and focus on (1) labour-intensive export sectors like gems and jewellery, leather and textiles and (2) be aimed at the export sectors, while (3) housing and steel, and some of the sectors most affected by the financial market meltdown. 

Automobile and related sectors in particular may get a boost with this package. Says Rakesh Amarnani, CEO, Avais Corporate Services, ''I expect the focus to be on realty, infrastructure and automobile sector. All three sectors are interest-rate sensitive and besides additional spending in these sectors, there will be a reduction of interest rates by the RBI''

Tthere could also be some more incentives for the housing sector, such as raising the limit from loans for upto Rs 20 lakh could be raised to Rs 30 lakh to qualify for interests at 9.25 per cent, the rate which public sector banks recently adopted.

Amarnani added that an additional spending of Rs75,000 crore is expected in infrastructure to put it on the fast track.

"As we have seen in US, the automobile sector is considered to be a key for economic recovery. The falling sales and production figures in the last two months is sure to be a incentive for the government to increase spending in this sectors," he said.

 In its first economic stimulus package, the government had, among other measures, announced a 4-per cent across-the-board cut in excise duty and hike in public expenditure in infrastructure projects.

It also sought to increase public expenditure by Rs147,000 crore through two supplementary demands for grants, which would be over and above the Rs750,000 crore already provided for in the Budget for 2008-09.