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Decoding government of india 20 lakh crore covid package
1. DECODING GOVERNMENT OF INDIA
20LAKH CRORE COVID PACKAGE
NAME: JITHO MONACHAN
MBA(BANKING AND FINANCE)
AMITY UNIVERSITY, MUMBAI
2. INTRODUCTION
• On May 12, the Centre announced an economic package of Rs 20 lakh crores..
The equity markets jumped up 2% the next day. The rupee strengthened.
• Finance Minister Nirmala Sitharaman unveiled the package over the five days.
There was a slew of measures announced for (among others) Micro, Small and
Medium Enterprises (MSME), migrant workers and farmers.
• The overall package, which stood at Rs 20,97,053 crore, included the Rs 1.92 lakh
crore stimulus from measures announced by PM Modi recently such as the
Pradhan Matri Garib Kalyan Package worth Rs 1.7 lakh crore.
• . The minister, towards the end of her speech, also provided a tranche-
wise complete break-up of the stimulus.
3.
4. FIRST PHASE
• The first set of relief measures announced by Nirmala Sitharaman focused on enabling the
Indian economy’s backbone – MSMEs that employ around 11 crore people and have a GDP
share of approximately 29 per cent.
• Out of the 16 announcements made by the minister, six were dedicated to the MSME
segment to infuse liquidity.
• This included Rs 3 lakh crore collateral-free loans and Rs 50,000 crore equity infusion for
MSMEs through Fund of Funds. Liquidity relief measures worth Rs 30,000 crore were also
announced for NBFCs, HFCs etc. and Rs 90,000 crore for power distribution companies.
• The minister also advised states and regulatory authorities for extending the registration and
completion date of real estate projects under RERA to de-stress developers and ensure
completion of projects for homebuyers to get their booked houses on time.
5. • Some highlights of phase one are:
• Collateral free loan of Rs 3 lakh crores for MSMEs. This will benefit 45 lakh units so that they
can resume work and save jobs.
• For stressed MSMEs, Subordinate debt provision of Rs 20,000 cr has been announced for 2
lakh MSMEs. It will benefit those which are NPAs or stressed MSMEs.
• A liquidity relief of ₹2,500 crore EPF support is being given to all EPF establishments, EPF
contribution will be paid by Govt. of India for another 3 months till August and will benefit
more than 72 lakh employees.
• Statutory EPF contribution for all organisations and their employees covered by EPFO has
been reduced to 10% from 12% earlier. This doesn't apply to govt organisations. This will
infuse Rs 6,750 cr liquidity into these organisations.
• Rs 30,000 crore special liquidity scheme for investing in investment grade debt paper of
NBFCs, HFCs and MFIs. These NBFCs are those that are also funding MSMEs. These will be
fully guaranteed by government of India.
• Rs 45,000 crore partial credit guarantee scheme 2.0 for NBFCs. The first 20% loss will be
borne by the guarantor that is government of India.
• For Discoms, a one-time emergency liquidity injection of Rs 90,000 crore against all their
receivables. The states will guarantee it.
• An extension of up to 6 months (without costs to contractor) to be provided by all
Central Government Agencies like Railways, Ministry of Road Transport & Highways,
Central Public Works Dept.
• On real estate, urban development ministry will issue advisory to states/UTs so that the
regulators can invoke force majeure.
6. SECOND PHASE
• Nirmala Sitharaman’s second tranche of measures catered to migrant workers and street
vendors. The minister introduced ‘one nation one ration card’ to allow migrant workers to
buy ration from any depot in the country.
• A special credit facility of Rs 5,000 crore was announced to support around 50 lakh street
vendors who will have access to an initial Rs 10,000 working capital.
• The minister also said that close to Rs 2 lakh crore will be given to farmers through Kisan
credit cards while 2.5 crore farmers, including fishermen and animal husbandry farmers,
would be able to get institutional credit at a concessional rate.
• The government allowed states to fund the food and shelter facilities to migrant workers
from the disaster response fund that would cost Rs 11,000 crore to the centre.
7. • Some highlights of phase two are:
• Concessional Rs 2 lakh crore credit to to 2.5 crore farmers via new Kisan Credit Cards.
Fishermen and animal husbandry farmers will also be included
• Rs 30,000 crore additional emergency working capital funds through NABARD to help
farmers in Rabi harvest and for the preparation of Kharif crops
• Rs 6,000 crore announced for CAMPA funds. This will employ Adivasi and tribal people for
afforestation work, forest protection, wildlife protection
• Want to give middle-income group earning between Rs 6 - 18 lakh per year affordable
houses under credit-linked subsidy scheme by extending it to March 2021
• 2.5 lakh middle-class people to get benefited through this move
• Initial working capital of Rs 10,000 will be given to each street vendor
• FM announces Rs 5,000 crore easy credit for all street vendors. 50 lakh street vendors can
avail of the Rs 5,000 crore special credit facility
• Government will provide Interest subvention of 2% for prompt MUDRA-Shishu Loans payees
for a period of 12 months
• This will give relief of Rs 1500 crore to MUDRA-Shishu loan takers
8. • Government trying to work on various factors. Some are:
• Trying for equal wage at national level for national floor rate wage. Every states will have
same wage for labourer.
• Scheme for ESIC benefits to companies having 10 employees
• ESIC benefits for workers in hazardous condition
• Gratuity for all permanent employees
• 14.62 crore man days of work has been increased. 2.33 more wage seekers can be engaged
• Wage rate for MNREGA workers has also been increased from Rs 182 to Rs 202
• 14.62 crore person-days of work generated till 13th May 2020. Actual Expenditure till date is
around Rs 10,000 crore
• Government released Rs 11002 crore of its contribution in advance to all States on 3rd April
• MNREGA offering work to 2.33 crore wage seekers in 1.87 lakh Gram Panchyats as of May 13
• Working capital limit of Rs 6,700 crore sanctioned for procurement of agriculture produce to
state government entities since March 2020
• 3 crore farmers with agricultural loans of Rs 4.22 lakh crore availed benefit of 3 months loan
moratorium
9. THIRD PHASE
• The third tranche of the measures worth Rs 1.5 lakh crore focused on the agriculture
and allied sectors including dairy, animal husbandry and fisheries as the government
announced steps to strengthen the overall farm sector.
• Sitharaman announced Rs 1 lakh crore agriculture infrastructure fund for farm-gate
infrastructure including using it for setting up cold chains and post-harvest
management infrastructure.
• Other key announcements made by the minister included Rs 20,000 to be provided to
fishermen through Pradhan Mantri Matsya Sampada Yojana, and Rs 10,000 crore to
formalize micro food enterprises.
• “This will be a cluster-based approach, with which, local value-added products can
reach global markets,” the minister had said. Rs 4,000 crore for herbal cultivation, a Rs
15,000 crore Animal Husbandry Infrastructure Development Fund, Rs 500 crore for
bee-keeping related infrastructure development were other packages announced by
the minister.
10. • Some highlights of phase three are:
• A facilitative legal framework will be created to enable farmers for engaging with processors,
aggregators, large retailers, exporters in a fair and transparent manner: FM Nirmala
Sitharaman.
• A central law will be formulated to provide adequate choices to the farmers to sell produce
at an attractive price, barrier-free interstate trade and framework for e-trading of agricultural
produce: FM Sitharaman.
• Govt to implement a Rs 500 crore scheme of infrastructure development related to
integrated beekeeping development centres, collection,marketing & storage centres, post-
harvest and value addition facilities; this will lead to an increase in income of 2 lakh bee-
keepers: FM Sitharaman.
• National Medicinal Plants Board will bring 800-hectare area by developing a corridor of
medicinal plants along the banks of river Ganga: FM Nirmala Sitharaman.
• Rs 4000 crore allocated for promotion of herbal cultivation; 10,00,000 hectare will be covered
in the next 2 years: FM Sitharaman.
• FM announces Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore to
support investment in dairy processing.
• FM Nirmala Sitharaman announces Rs 4,000 crore for promotion of herbal cultivation to
bring 10 lakh hectares of land under herbal growing in next 2 years.
11. FOURTH PHASE
• The fourth instalment of the Rs 20 lakh crore package comprised of reforms for sectors
including coal, minerals, defence production, air space management, airports, MRO,
distribution companies in UTs, space sector, and atomic energy.
• Nirmala Sitharaman on Saturday announced easing utilization of the Indian air space to
reduce air travel cost.
• The minister also announced the commercial mining in the coal sector and privatizing
discoms in metros to streamline their functions for better accountability.
• The minister also talked about private participation in the space sector along with coming up
with a policy for private players.
12. • Some highlights of phase four are:
• FDI limit in defence manufacturing sector under automatic route is being raised from 49 per
cent to 74 per cent.
• To ensure time bound defence procurement process and faster decision making, project
management units will be set up to support contract management
• In critical areas like defence we need to boost programmes like Make in India. We shall notify
list of weapons and platforms which shall not be allowed for import but we shall have them
bought from India.
• Power distribution companies in Union Territories will be privatised in line with tariff policy
reforms. This will lead to better service to consumers and improvement in operational and
financial efficiency in distribution
• We will corporatise Ordnance Factory Board to improve autonomy, accountability and
efficiency in ordnance supplies.
• Civil aviation is up for a big leap. We will be able to get to our destination in shortest
possible time saving fuel, time, cost.
• 6 more airports are for auction. Additional investments are likely to happen by private
players.
• Rs 50,000 crore will be spent by government to ensure evacuation infrastructure is being
provided in coal sector.
• We want to remove distinction between captive and non-captive mines to allow transfer of
mining leases.
13. FIFTH PHASE
• In the fifth tranche the government added ₹40,000 crore budget
allocation in the Mahatma Gandhi Rural Employment Guarantee Act
(MNREGA).
• However, according to a financial services company Nomura, the
minimum wage job may be a temporary relief and once the lockdown is
over, urban businesses will struggle with the shortage of labour.
14. • Some highlights of phase five are:
• States have so far borrowed only 14 per cent of the limit which is authorised to them. 86 per
cent of the limit remains unutilised. Centre has decided to increase borrowing limits of states
from 3 per cent to 5 per cent of Gross State Domestic Product (GSDP) for 2020-21: FM
• Centre increases borrowing limits of states from 3% to 5%: FM
• The states have seen a sharp decline in the revenue, we have consistently extended help to
the states. Revenue Deficit Grants to states of Rs 12,390 crores was given on time in April &
May despite Centre's stressed resources; devolution of taxes of Rs 46,038 in April given fully:
FM
• Govt to announce a new public sector policy - a list of strategic sectors requiring presence of
PSEs in public interest will be notified. In strategic sectors, at least 1 enterprise to remain in
public sector but pvt sector to be allowed. In other sectors, PSEs to privatised: FM
• Debts due to COVID19 will not be included in the category of 'default': Finance Minister
• Timely action was taken during COVID19 to reduce compliance burden under various
provisions of Companies Act. Board meetings were allowed to be online, rights issues can be
done digitally, major reform in corporate governance: Finance Minister Nirmala Sitharaman