Emphasizing that real estate, power, steel, gems and jewellery sectors are in real crisis, Assocham has approached the government for incentives like a cut in excise duty, teaser loans for housing and interest subvention for exporters.
Besides, the Reserve Bank of India, banks, states and the Central Government should move fast in taking the troubled power distribution companies (discoms) out of morass. Otherwise they would become dead assets and become a big drag on the exchequer, pushing up bad loans.
The RBI showed a great courage and slashed the policy interest rates, which however, did not get transmitted to the borrowers, on earlier occasions. Between September 2014 and August 2015, while the repo rate got reduced by 75 basis points (before the latest 50 bps cut), the bank’s weighted average lending rate was marginally brought down to 11.93 per cent. Certainly, the banks did not help the situation and some of these core employment generating industries slipped further into troubles because of lack of consumer demand, high interest costs and cheap imports.
As the RBI has correctly noticed, the average industry capacity utilization is 77 per cent. For creating additional demand, the government will have to chip in with, rather bold measures and create extra elbow room for the select industries by way of extending short tenure stimulus on construction material like steel, cement, power equipment while for the gems and jewellery, export sops like interest subvention must seriously be considered.
ASSOCHAM Secretary General Mr D S Rawat said that it would be wrong to assume that the special dispensation would create a hole in the government’s fiscal purse. On the contrary, extra demand would mean more tax collection and increased revenue while creating an overall positive atmosphere. On the contrary, extra demand would mean more tax collection and increased revenue while creating an overall positive atmosphere.