Great Expectations

All eyes are on Saturday. There are huge expectations of major fiscal measures to come in and this in turn is expected to give a major boost to the economy. But then, there are expectations. In reality, though it is good that the Govt is working towards making the Indian economy resilient, and is trying to infuse liquidity back into the system, the fact of the matter is that at this point of time, this infusion would simply not be enough. With Europe in recession and world over news of recession and slowdown coming in, there is no way in which India could emerge unscathed with just a small economic booster. At the same time, what is to be appreciated is that, yes, there is some action being taken – something is better than nothing. But remember, this liquidity would just not be enough.

 
 

There are major discussions and debates about what to expect on Saturday. And we give you a gist of what fiscal measures to expect, based on all these discussions and debates.

 
 

         CRR is not expected to be cut. The reverse repo rate which is at 6% could be reduced to 5% and the repo rates from 7.5% to 6%. Infact the prices of Government Securities (G-Sec) shot up by around Rs.2 on Wednesday on expectations that the RBI would soon announce "steep cuts" in its signal rates.

 
 

• External commercial borrowings (ECB) norms could be eased further.
  

 
 

• There is no doubt that interest rates, the PLR would come down. Expectation is that FD rates, which currently rules at 10.5% (11% for senior citizen) on the maximum slab, should be reduced to around 9%, bringing about a parity and making it easier for the banks.
  

 
 

• Falling exports have also become a major cause for concern. With buying from USA and Europe, the biggest markets, coming down, exports would need something more. Major export rebates, especially for sectors like textiles, leather, handicrafts.
  

 
 

• Import duty is also expected to be reduced and rationalised. The most beleaguered is the auto sector, which is now threatening to come down to a grinding halt. Major reliefs for auto and the metal sector – especially steel is on the anvil.
  

 
 

• Major announcements are expected in the housing sector. The Govt is expected to give boost to mass housing, making it easier for the common man to buy a house, which continues to remain out of his reach, even in this falling market. Refinance windows of over Rs.1,000 crore each is being talked about through National Housing Bank (NHB) and Small Industries Development Bank (SIDB).
  

 
 

• There is huge expectation that the Govt will raise the full tax deduction limit from the current maximum of Rs 1.5 lakh annual interest payment on housing loan for self-occupied property to Rs.2.50 lakhs. Similarly, also raise the limit of Rs.1 lakh annual housing loan principal repayment to Rs.2 lakhs.
  

 
 

• Another major revolutionary thought doing the rounds is that the Govt should give a SLR status to the Govt bonds. This alone has the ability to inject around Rs.1,50,000 crores into the system.
  

 
 

• There is also talk about raising liquidity with the NBFCs, which along with the banks, can really help India tide over, to some extent, the current liquidity crunch. NBFCs have the money, like the banks but no will to lend. And it is this "will" which the Govt has to change.
  

 
 

This basket of fiscal measures would go a long way in improving the sentiments but whether it would be able to inject enough liquidity and help tide over the slowdown needs to be seen.

 

By Ruma Dubey (Source: sptulsian.com