India unveils Dh26bn stimulus in bid to revive slowing growth

Tax breaks extended on export promotion and rules eased on overseas borrowing for affordable homes

FILE PHOTO: India's Finance Minister Nirmala Sitharaman arrives at her office before leaving for parliament to present the federal budget in New Delhi, India, July 5, 2019. REUTERS/Anushree Fadnavis/File Photo
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India’s finance minister Nirmala Sitharaman unveiled measures involving at least 500 billion rupees (Dh25.85bn) in stimulus to help exporters and eased overseas borrowing norms for some housing projects, as part of efforts to bolster economic growth.

A new programme to extend the reimbursement of taxes and levies on export promotion will be effective from January 1 and involves forgoing 500 billion rupees in revenue, Ms Sitharaman told reporters in New Delhi on Saturday. Overseas borrowing rules will also be relaxed for affordable housing, she said.

India’s exports have declined in two of the three months to August despite a weaker rupee, while a series of economic shocks, including a currency ban in 2016, a new law to curb building delays and the introduction of a nationwide consumption tax have dented property market sentiment and home sales in the last few years.

The easier foreign borrowing rules for housing, along with a special 100 billion rupee funding window for affordable residential projects will help builders access money for reviving stalled projects, Ms Sitharaman said.

The measures “seem to come in tranches, rather than at one go,” she said, referring to some steps unveiled earlier to boost growth. “But each time we’re making a clear attempt to also connect with the previous announcements that we have made.”

Saturday’s measures come on top of steps last month to boost vehicle purchases, attract foreign funds and ease foreign investment rules to revive demand and boost investments in the economy, where growth slowed to a six-year low of 5 per cent in the three months to June.

The Reserve Bank of India last month lowered its growth forecast for the economy to 6.9 per cent for the year to March, amid risks from a global slowdown and US-China trade tensions.

Prime Minister Narendra Modi, who won a second consecutive term in office in May, is under pressure to reverse the worst slowdown under his watch so far. Unemployment is at a 45-year high, car sales have slumped the most on record and new investments have been sluggish in the economy, which grew 5 per cent in the June quarter from a year ago — the slowest pace since March 2013.