The Finance Minister Nirmala Sitharaman recently announced the 20 Lakh Crore Package in five tranches. The idea of such a scheme is to increase the purchasing power of the people. Furthermore, it will infuse liquidity which will increase demand and help in the revival of the economy.
|Economic Package||Amount Announced (in Crores)|
|Tranche 1 ( MSME + NBFC + Power )||Rs. 5,94,550|
|Tranche 2 (Migrants, KCC, NABARD, MUDRA etc.)||Rs. 3,10,000|
|Tranche 3 ( Agriculture)||Rs. 1,50,000|
|Tranche 4 + 5||Rs. 48,100|
|Earlier Stimulus Measures||Rs. 1,92,800|
|RBI Measures||Rs. 8,01,603|
Source: Atmanirbhar Bharat-part 5- Government Reforms and Enablers
The Earlier Stimulus measures, in which the government provides incentives in case of financial crisis amounted to Rs. 1,92,800 Crore. This included the Pradhan Matri Garib Kalyan Package worth Rs. 1.7 Lakh Crore, Revenue Lost to Tax Concessions since March 22nd, 2020 worth Rs. 7,800 Crore and PM’s announcement for health sector Rs. 15,000 Crore. Hence, RBI had taken certain steps to induce liquidity. Therefore, the RBI was provided with Rs. 8,01,603 Crores.
First Tranche – Rs. 5,94,550 Crore
In the first tranche, benefits are primarily for MSMEs, NBFCs, Salaried workers, employers, taxpayers and investors. In fact, in the case of MSMEs, borrowers with up to Rs. 25 Crore outstanding and Rs. 100 Crore turnover became eligible for a collateral-free automatic loan worth Rs. 3 Lakh Crore in anticipation that it will restart 45 lakh units and save jobs. In addition to that, the subordinate debt facility of Rs. 20,000 Crore will help around 2 Lakh MSMEs in need.
Besides, an equity infusion of Rs. 50,000 Crore is also available to ensure the capacity of the MSMEs via Mother Funds and daughter funds. Furthermore, the emphasis on self-reliance is seen with the announcement of banning global tenders and providing e-market linkages. In the same vein, there is also a change in the definition of the MSME which remained unchanged since the MSME Development Act, 2006.
For the assistance of non-bank lenders, SIDBI will purchase investment grade securities of non-bank lenders under Rs.30,000 Crore special liquidity scheme and will be guaranteed by the Government of India. Besides, Rs. 45,000 Crore Scheme in which the first 20% loss, will be guaranteed by the Government of India. Thus, the State Governments will ensure one-time emergency liquidity of Rs. 90,000 Crore. In addition to that, for the benefit of more than 72 lakh employees, liquidity relief of Rs. 2,500 Crore EPF support is provided.
Thus, to infuse Rs. 6,750 Crore of liquidity EPF contribution is reduced to 10% (now) from 12% (earlier). Furthermore, on payments for contracts, professional fees, interest, rents, dividend, commission and brokerage, a reduction of 25% TDS & TCS is provided, which will induce Rs. 50,000 Crore Liquidity. To pay outstanding amounts to power producers, Rs. 90,000 Crore liquidity will be provided to the concerned companies. Finally, the due dates of all income tax filling have been extended from July 31st to November 30th, 2020.
Second Tranche – Rs. 3,10,000 crore
In the Second Tranche, benefits have been committed to around 8 crore migrants (who do not have NFSA cards) to provide 5 kg of wheat/rice per person and 1 kg of channa /family per month for next two months. Moreover, other benefits in the interest of migrant workers, farmers and the poor in the 20 lakh crore package include interest subvention for MUDRA Shishu loans, Housing CLSS-MIG, Additional emergency WCF through Nabard, Additional credit with the help of KCC and special credit benefit for street vendors amounting to Rs. 1,500 crore, Rs. 70,000 crore, Rs. 30,000 crore, Rs. 2 lakh crore and Rs. 5000 crore.
Third Tranche – Rs. 1,50,000 crore
In the same vein, the third tranche provides incentives for agricultural infrastructure and logistics systems. In addition to that, incentives have been provided to the Micro food enterprises, the farm gate infrastructure, PM Matsya Sampada Yojana, Operation Green applicable to all vegetables (Top to Total), Agri infra fund, beekeeping initiative, Promotion of herbal cultivation and Animal husbandry infra development amounting to Rs. 10,000 crore, Rs, 1 lakh crore, Rs. 20,000 crore, Rs. 500 crore, Rs. 1 lakh crore, Rs. 500 crore, Rs. 4,000 crore and Rs. 15,000 crore, respectively.
Fourth and Fifth Tranche – Rs. 48,100 crore
Finally, the fourth and fifth tranche publicised structural reforms which benefited 8 sectors comprising of coal, minerals, defence, air space management, airports, MRO, distribution companies in UTs, space sector and atomic energy. Additionally, the fund has been provided to Viability gap funding and Additional MGNREGS amounting to Rs. 8,100 crore and Rs. 40,000 crore respectively.
For now, the biggest challenges for the industries will be restarting the business. But, for any economic activity to take place, labour and capital are needed whose availability is affected due to COVID-19 pandemic. Furthermore, availability of labour would mean travel and transport, which is risky during this time. Hence, businessmen will have to manage the cost along with social distancing. Thus, In conclusion, 20 lakh crore package is meticulously designed for the revival of the economy.
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