Decoding The 20 Lakh Crore Stimulus Package

1. PRESENTED BY :
MUKUND SHARMA
1

2. INTRODUCTION
 Prime Minister Narendra Modi on May 12 announced a stimulus package totalling Rs 20
lakh crore to rescue the economy reeling under the impact of coronavirus.
 It was announced under “ATMANIRBHAR BHARAT”
 This package is nearly 10% of India's GDP.
 The Rs 20 lakh crore stimulus includes packages worth nearly Rs 7-8 lakh crore already
announced by the Finance Ministry and the Reserve Bank of India (RBI).
 The package was announced in different tranches by the Finance Minister, with each
tranche focusing on particular aspects of the economy.
 The economic relief package was undertaken by the government in 5 tranches..

3. 3

4. FIRST TRANCHE
(May 13, 2020)
 These measures were dedicated to the MSMEs for liquidity
injection. It included Rs 3 lakh crore collateral-free loans and
Rs 50,000 crore equity infusion through Fund of Funds.
Liquidity relief measures worth Rs 30,000 crore were handed
to NBFCs, HFCs, etc. and Rs 90,000 crore for power
distribution companies. Regulatory authorities were asked to
extend the completion date of real estate projects under
RERA so as to de-stress developers.

5. SECOND TRANCHE
(May 14, 2020)
 This catered to migrant workers and street vendors. The idea of
one- nation-one-ration-card to allow people to buy ration from
any depot in India was announced. A special credit facility of
Rs 5,000 crore to support 50 lakh street vendors has been
declared. About Rs 2 lakh crore will be given to farmers
through cards, while 2.5 crore farmers would get credit at a
concessional rate. The government has allowed states to fund
the food and shelter facilities for migrant workers, which
would cost Rs 11,000 crore to the Centre.

6. THIRD TRANCHE
(May 15, 2020)
 This tranche is focused on agriculture. Key announcements
included Rs 1 lakh crore agriculture infrastructure fund for
farm-gate infrastructure, and Rs 30,000 crore to formalize
micro food enterprises. This will help local value-added
products reach global markets. Rs 4,000 crore for herbal
cultivation, a Rs 15,000 crore Animal Husbandry
Infrastructure Development Fund, and Rs 500 crore for bee-
keeping related infrastructure development was also
initiated.

7. FOURTH & FIFTH
TRANCHE
(May 16-17, 2020)
 Easing utilization of the Indian air space to reduce air travel cost, commercial mining in the coal sector, and
privatizing distribution companies in metros came up. There was an announcement about private participation in the
space sector.
 On the final day, Rs 40,000 crore was earmarked for MGNREGA for job creation in India's hinterland. A new Public
Sector Enterprises Policy that would consolidate PSU firms in strategic sectors was announced. For improved ease of
doing business among MSMEs, the initiation period of fresh insolvency proceedings against MSMEs was extended.

8. 8
OVERALL STIMULUS PACKAGE PROVIDED BY
“ATMANIRBHAR BHARAT”

9. RESULT
 Even though the announcements made are worth over Rs 20 lakh crore, the actual cash outlay by the government this
year and the impact on the fiscal deficit will be far less.
 This is because many of the government’s proposals are credit-focused or are aimed at easing liquidity concerns for
many affected sectors.
 Accordingly, The Wire’s analysis places the additional and direct fiscal spending as a result of the Atmanirbhar Bharat
Abhiyan economic package at likely less than Rs 2.5 lakh crore.
 As noted above, it is difficult to hone in on an exact figure as some of the spending will depend upon on the Centre’s
pace of implementation and others on how many takers there are for certain programmes.
 Nevertheless, the fiscal cost this financial year will likely be a little over 10% of the overall Rs 20 lakh crore package and
a little over 1% of India’s GDP.

10. 10
Fiscal Cost of Rs 20 Lakh Crore Package

11. MY OPINION
 The announcement of Rs.20 lakh crore special economic package by the Prime Minister, is definitely a welcome step in the right
direction, and it was due for quite some time now.
 The focus on liquidity, laws, labour and land - should help small businesses plan a smoother recovery as the lockdown eases.
 Markets have also taken it positively with the benchmark indices up by more than 2.5%.
 However, the major challenge for the government remains as how to balance expenditure with revenue, else our fiscal deficit
could go out of hand.
 But at the same time, positives measures are required to save many industries, which are on the verge of collapse, like aviation,
hospitality, travel and tourism and many others.
 This is a very welcome step by the government and will help India progress on the path of self-reliance.