In 2008, the Indian government resuscitated the Indian economy back to life with a stimulus package to strengthen India’s business finance position. Deepening global financial meltdown influenced this act. Close to four billion US dollars was part of the stimulus package. By cutting down on miscellaneous expenses, and also on the repo rate, the government of India raised the internal demand for business finance.
Investors and businessmen were drawn into a sense of hope. Incentives were piggybacked on the stimulus package. To increase exports, over fifty million US dollars was chalked out as part of incentives. Cottage industries, where manual labor was more concentrated, became the beneficiaries of the stimulus package. Efforts such as these, gave the cottage industries operating business finance, and a fresh lease of life. Aimed to be an act of resuscitation, the stimulus package led to not only a revival, but also a revolution.
A stimulus package is a kind of revival business finance. Business finance when available more freely in the market has lesser demand-rigidity. So lending of it can be more liberal. When lending is liberal with regards to interest rates, there will be more takers. Money taken will be used to produce profits or income. Profits or income, become savings. Savings are kept in banks, or invested. Ultimately serendipity happens, leading to a favorable business finance condition.
The Indian government as part of its stimulus initiative, provided tax rebates on business finance for small and medium scale industries. Different products were identified to have a revision of their value added taxes. By doing this, the government increased the consumption of these products. By reducing Central Value Added Tax on cars, cement, and textile, the government ensured that people stopped to stop buying these commodities. Companies in housing, exports, power, automobiles, and infrastructure received a wave of fresh business finance through the stimulus package.
In 2008, the Indian economy was growing at around 6-7 percent. With the inclusion of the stimulus package, things changed. Fresh business finance created a sea of activity in the Indian economy. A new road was opened for India Inc.