Topics Covered:
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Package to Boost Exports and Revive Housing Sector
What to study?
For Prelims: Key highlights of the package.
For Mains: Why the economy is slowing down, need for reforms and ways to address the challenge?
Context: Centre has announced a third set of government decisions to revive the economy. The new package aims to boost exports and revive a housing sector.
Background:
The decisions follow two previous mega announcements to encourage private sector investment and to bring further stability into the banking system through several public sector bank mergers.
Key announcements:
For housing sector:
- Special window to provide last-mile funding for stalled housing projects.
- Who can avail special window? Non-NPA (Non Performing Assets) and non-NCLT (National Company Law Tribunal) projects and worth positive in affordable and middle income category.
- Funding: The government may contribute to the Rs 10,000 crore fund for the special window. The rest of the funds will be from the Life Insurance Corporation (LIC) and other institutions and private capital from banks, sovereign funds, etc.
- External commercial borrowing (ECB) guidelines will be relaxed to facilitate financing of home buyers who are eligible under the PMAY, in consultation with RBI.
Measures for exports sector:
- It came in six different silos and covered steps that would address comprehensively tax and duties refunds for exporters; improve credit flow to the export sector and launch of a special free trade agreement (FTA) utilisation mission.
- India will also now host annual mega shopping festivals in 4 places.
- A new attractive scheme for remission of duties or taxes on export product (RoDTEP) to replace the existing Merchandise Exports from India Scheme (MEIS) from January 1 next year.
Definition of affordable housing:
According to the Ministry of Housing and Urban Affairs, the definition of affordable housing is categorised into three parts, as per the minimum area of habitation.
- For the Economically Weaker Section, affordable housing is defined with an area of habitation between 300-500 sq ft. The Lower Income Groups have a minimum area of 500-600 sq ft, while Middle Income Groups are allotted between 600-1,200 sq ft.
Way ahead:
Without enacting any major supply-side reforms like land and labour reforms that can raise potential growth, it is hard to see how greater spending can raise growth for very long.
- The government may believe that the present slowdown, marked by five consecutive quarters of dropping growth, is merely a cyclical one.
- But given the size of its victory in two consecutive elections, the government should aim higher by trying to push through long-pending structural reforms that can raise India’s growth trajectory to the next level.
Sources: the Hindu.
