THE STIMULUS PACKAGE: A complete analysis on 20 Lakhs Crore Package.

Last week, Prime Minister Narendra Modi announced to the country that the future of India is bright and “Atmanirbhar Bharat” is the mission which will help in the progress of country, during and after the end of this pandemic. For this purpose, PM Narendra Modi announced that a stimulus package of Rs. 20 lakh crores has been allocated for use in order to stimulate the current condition, which forms 10% of the total economic growth/total production of the nation (GDP, as people know it).
He said that the package would focus on 4 Ls– Land, Labour, Liquidity and Laws respectively, which would cover several areas like – Cottage Industries, Micro, Small and Medium Enterprises (MSMEs), the working class, middle class and industries along with the focus on poor, laborers and migrant workers, both in the organized and unorganized sectors.

This amount has been divided amongst different sectors, which was declared by Finance Minister Nirmala Sitharaman in depth.

The Atmanirbhar Bharat Abhiyan was discussed and informed to its citizens by the 5 days long declaration by the Finance Minister, who gave an in depth insight about the distribution of the package in 5 different tranches (parts) covering as many major areas as possible.

The First Tranche included funding and loans for small businesses, salaried workers, employees, non-bank lenders and other areas. Rs 3 lakh crores free loans would be provided for MSMEs, which will help to restart around 45 lakh units. Further, Rs 20,000 crore for 2 lakh stressed MSMEs and Rs 50,000 crore equity infusion via Mother fund-Daughter fund for MSMEs (fund which will provide risk capital for those which need handholding - help) would be initiated, without distinction between service units and manufacturing units. 

The definition of MSMEs has been changed to bring in more enterprises and has been made broader. E-Market linkages would be provided, as firms cannot participate in trade fairs due to the COVID-19 Pandemic, allowing with disallowing global tenders for government contracts, so that the local businesses can get the contracts. Further, the Non-Bank Financial Institutions, which are funding MSMEs, would be given Rs. 30,000 crore liquidity scheme for investment, which would be fully guaranteed by the Government of India. They will also be provided with Rs. 45,000 crore partial credit guarantee scheme, of which the first 20% loss would be borne by the Government of India. The Distribution Company of India, DISCOMs would be provided with one-time emergency liquidity injection of Rs. 90,000 crores (such emergency funds are provided to companies that are facing liquidity issues, here the power sector is facing problems due to the fall in revenue), which would be guaranteed by the states. Power distribution companies will get Rs 90,000 crore liquidity from state-owned Power Finance Corporations and Rural Electrification Corporations which will allow these discoms to pay dues to power producers. Further, 72 lakh employees would be benefitted by the liquidity relief of Rs 2,500 crore Employees Provident Fund support to all EPF establishments, which will be paid by the government till August). Statutory EPF contributions would also be brought down by all organizations. Moreover, the income tax return filing dates have been extended, all government agencies like railways, Central Public Works Department etc., would be extended, under the urban development program, the projects would get up to 6 months extension. This and a lot more was covered in the first tranche of the information.

Second tranche’s main focus was laid down upon the migrant workers, small farmers and the poor people. Free food for the migrants which would include 5kg rice per person and 1 kg channa Dal (Pulse) to the families per month will be provided, which would reach them through the state government. Using the tagline ‘One Nation, One Ration Card’, a person can use the ration card in any part of the nation. There was also mention about providing affordable housing and rental accommodation for the migrant workers, which would be covered under the PM Awas Yojana, for which the states will be given incentives to carry out the same. Those who have taken loan of Rs. 50,000 (covered under MUDRA Shishu Loan) would be aided with a subversion of  2% interest. Street vendors would also be given small loans. Further, and most importantly, the government would extend Rs 30,000 crore additional capital emergency funds through National Bank for Agricultural and Rural Development (NABARD) for post-harvest activities for Rabi and Kharif crops for small and marginal farmers. Also, under the PM Kisan Credit Card, Rs 2 lakh crore of concessional credit would be provided to boost farming activities, along with animal husbandry and fisheries. Etc.

The Third Tranche included the farmers, and sectors as food processing and allied activities. Rs. One lakh crore fund would be provided for strengthening the infrastructure of farming activities, e.g. warehouses, post harvest storage infrastructure, cold chains etc. Rs 10,000 crore fund would be put under the micro food scheme will with cluster based approach, state wise, which will benefit 2 lakh Micro Food Enterprises. The Pradhan Mantri Matsya Sampada Yojana will be launched for development of marine and inland fisheries, for which Rs 20,000 crore will be spent to fill the gaps in value chains. Provision of Rs 13,343 crore would be made for vaccination of livestock in India to eradicate foot and mouth disease. Dairy infrastructure and cattle feed would get the attention of around Rs 15,000 crore to ramp up the sector. Rs 500 crore have been allocated for beekeeping as well. Further, Rs. 4000 crore has also been allocated to herbal and medicinal plants, promoting the cottage industries. Several other reforms for Agricultural marketing and agricultural quality assurance measures have also been included.

The fourth tranche included 8 important sectors like - Coal, Minerals Defense Production, Airspace management, Social Infrastructure Projects, Power distribution companies, Space sectors and Atomic Energy. Self reliance of the coal sector to increase domestic coal production would be the main focus along with investment of Rs. 50,000 crores for the enhanced CIL's (Coal India Limited) target of 1 billion tons.  Around 500 mining blocks would be transparently auctioned and private investment would be allowed to come in. The Foreign Direct Investment for defense manufacturing would be increased along with indigenization (localization) of production would be initiated. Further, civil aviation rules would be relaxed in order to bring about ease of flying, along with various other measures in the Civil Aviation sector. Also, Power Distribution Companies in Union Territories will be privatized, so that it strengthens and stabilizes the sector. Further, the Private Sector Investments would be boosted with scheme of Rs 8,100 crores. Private participation in the space sector and setting up of research facilities in nuclear power sectors to bring about more synergy and boost are among the several other measures in the fourth tranche.

Lastly, the fifth tranche included several other sectors. MGNERGS would get an additional funding of Rs 40,000 crore, so that new jobs could be created under the scheme as well. Further, all districts would get special disease hospitals and labs. In the field of education, PM e-Vidya programme is to be launched immediately in which Class (1^st to 12^th) will have one TV channel. Top 100 universities can start online courses by May 30, 2020. The companies act would be decriminalized, so that the courts would experience some amount of ease in handling cases. Further, fresh insolvency cases of firms would be relaxed for one year due to the COVID-19 crisis. The most interesting aspect being the fact that all public sector undertakings would be relaxed and the private sector would be allowed to come in. Thus privatization will take place in the country.

However, the Stimulus Package didn’t seem to leave any area with respect to the distribution of the package, bringing India in line with the other nations who have also taken similar steps. The Reserve Bank of India’s Liquidity measures also forms an important part of the Atmanirbhar Bharat Abhiyan along with PM Modi’s speech and Finance Minister Nirmala Sitharaman’s 5 tranche division.

The most amount of money has been allocated in the first tranche, followed by the second, third, fourth and the fifth tranche. These were very long awaited reforms, mainly for the sectors of agriculture and businesses. A lot of focus has been placed on the easing up of the public sector and the increase in privatization, with a focus on local privatization. This means that the local industries, businesses and firms would be allowed to enter and boost their sector. It was also seen that, after PM Modi’s speech, the focus has increased by almost ten times, of the amount which was utilized for all these sectors before his speech. An important thing which needs to be understood is that, though it is such a huge package, yet the actual cash outlay would be less, as most of the measures are credit based, which would be on the first stage, initiated by the banks, and not by the center. Also, through this package, the Government is anticipating a drastic increase in growth which will help one and all. The focus is on a V shaped growth (sudden fall in the economy. At the tip, various measures would be introduced, which will see a sudden spike in the growth.) But the reality is, that such a case would not be seen anywhere in the near future. When the world will be facing a fall in the economic growth by around 3%, then such growth in India seems like a platonic idea. Also, some sectors which include self employed people have also been left out. At this point, when the world is undergoing a crisis, nothing would seem sufficient, yet it is interesting to note that a lot of sectors have been covered under this package.

There has been common consensus among the people that these were long awaited reforms which are finally out here. These measures should have been introduced little by little starting in the month of March itself, because now as things would slowly open up, there would be a lot of execution which needs to be taken care of. Yet, even at this stage, if all the policies are executed and implemented carefully and professionally, then too there is a scope to have a stable economy at least by the end of this year.

All things kept aside, whether it would lead towards the growth that the government is wishing for, or will it benefit one and all is a matter of time, debate and observation.

- Vijayasree V