India extends guarantee on loans to health, tourism sectors
Nirmala Sitharaman | Photo Credit: Reuters

India has extended a federal guarantee on bank loans to health and tourism services while waiving visa fees for 500,000 foreign tourists, the finance minister said on Monday, stepping up support for the pandemic-hit economy.

The government will expand federal guarantees on loans to businesses to 4.5 trillion rupees ($60.7 billion) from an earlier limit of 3 trillion rupees, finance minister Nirmala Sitharaman told reporters.

The government will provide a guarantee of 1.1 trillion rupees on loans to the health sector and medical infrastructure, she said, that will enable them to raise loans at a lower interest rate of 8-8.25% a year.

The Emergency Credit Line Guarantee Scheme (ECLGS), launched last year, has helped cash-starved small businesses raise funds during the COVID-19 lockdown for working capital and to meet their orders.

The government will extend benefits from the free foodgrain programme for poor people, launched last year, till November that will cost 938.7 billion rupees, bringing the total cost of the programme to more than 2.27 trillion rupees, she said.

A slow vaccination drive and local restrictions after a massive second wave of infections and deaths across the country have hit economic activities such as retail, transport and construction while putting millions out of work.

India's economic growth rate picked up in January-March to 1.6% from a year earlier, but economists are increasingly pessimistic about this quarter after a huge second wave of COVID-19 infections hit the country in April-May.

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