The government will extend tax breaks for industrial park schemes and developers of real estate and road projects to stimulate the economy and lift growth to 8-9 percent by the end of 2010, the finance minister said on Monday. Pranab Mukherjee also told lawmakers in parliament the government would provide a 1 percent interest subsidy on home loans up to one million rupees ($20,747) for one year. Earlier this month, the government ramped up spending for 2009/10 (April/March) to support a fragile economic recovery, spooking financial markets with plans for record borrowing and its biggest budget deficit in 16 years.

But MPs and industry lobbies have sought additional tax relief to help beat a slowdown that saw the economy grow 6.7 percent in the year through March after 3 years of expansion of at least 9 percent. “With a view to providing stimulus to infrastructure sector to generate incomes in the wake of economic slowdown, I propose to extend the sunset clause for industrial park scheme by a further period of two years,” Mukherjee said. Monday’s proposals will be added to the fiscal year budget put forth by Mukherjee earlier this month.

“In India, the economic recovery has begun and I am confident that we will be able to reach the high growth rate of 8-9 percent by the end of 2010,” he said. Firms engaged in repair and maintenance of roads would be exempted from service tax, while developers would get tax breaks if they complete real estate projects by March 2012, he said. Producers of natural gas from coal-bed methane blocks would also be extended tax breaks. A tax holiday for firms engaged in food processing has also been extended. The agriculture sector needs to grow by 4 percent annually for the economy to expand by 9 percent, Mukherjee said.

Popularity: 1% [?]