In order to boost demand in key sectors in the festival session and to bring relief to the consumers, especially the middle class, public sector banks will provide cheaper loans for auto and consumer goods purchases. The government has agreed to provide additional funds to the PSU banks to enable them financing of products from select sectors such as two-wheelers and consumer durables. The government is of the view that this selective stimulus will give a boost to capacity addition, employment and production, helping spur growth that fell to a four-year low of 4.4% in April-June quarter of current fiscal.
The decision to increase the quantum of capital infusion to PSU banks was taken at a meeting between Finance Minister P Chidambaram, Economic Affairs Secretary Arvind Mayaram, and RBI Governor Raghuram Rajan. Lower interest rates will depend on the lending capacity of banks, therefore, the government will enhance capital support to banks from the budgeted Rs 14,000 crore to help them lower interest rates on select category of goods identified. However, the government did not disclose the quantum of additional capital infusion.
At present, the demand in two key sectors such as Auto and consumer durables are worst hit due to the prevailing economic slowdown. The output of the consumer durables sector declined by 9.3 per cent in July, compared to growth of 0.8 percent in the same month last year. On cumulative basis, Indian consumer durable sector witnessed a 12 percent decline in output in April-July as compared to 6.1 percent growth in the same period of previous fiscal. In Auto sector, the demand of vehicles is also adversely hit by the rising inflation and existing economic downturn. The two-wheeler sales recorded a flat growth of 0.72 percent in April-August period current fiscal, as against a growth of 6.8 percent in the corresponding period last year. The latest government’s move is expected to support these sectors by increasing demand during the festive season, starting with Onam and going on till Diwali, which is considered as a crucial time for consumer durables and auto industry sales. Festival season contributes almost 25-30 percent to the year's turnover for Indian consumer durable industry.
The decision to increase the quantum of capital infusion to PSU banks was taken at a meeting between Finance Minister P Chidambaram, Economic Affairs Secretary Arvind Mayaram, and RBI Governor Raghuram Rajan. Lower interest rates will depend on the lending capacity of banks, therefore, the government will enhance capital support to banks from the budgeted Rs 14,000 crore to help them lower interest rates on select category of goods identified. However, the government did not disclose the quantum of additional capital infusion.
At present, the demand in two key sectors such as Auto and consumer durables are worst hit due to the prevailing economic slowdown. The output of the consumer durables sector declined by 9.3 per cent in July, compared to growth of 0.8 percent in the same month last year. On cumulative basis, Indian consumer durable sector witnessed a 12 percent decline in output in April-July as compared to 6.1 percent growth in the same period of previous fiscal. In Auto sector, the demand of vehicles is also adversely hit by the rising inflation and existing economic downturn. The two-wheeler sales recorded a flat growth of 0.72 percent in April-August period current fiscal, as against a growth of 6.8 percent in the corresponding period last year. The latest government’s move is expected to support these sectors by increasing demand during the festive season, starting with Onam and going on till Diwali, which is considered as a crucial time for consumer durables and auto industry sales. Festival season contributes almost 25-30 percent to the year's turnover for Indian consumer durable industry.
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