The Indian government announced a Rs. 20 lakh crore fiscal stimulus package, amounting to 10% of India's GDP, to help revive the economy impacted by the COVID-19 pandemic. The package includes collateral-free loans for MSMEs, equity support, reduced TDS/TCS rates, and a liquidity window for power distribution companies. The goal is to boost manufacturing, achieve self-reliance, and address challenges like improving infrastructure and innovation to make India a globally competitive manufacturing hub while avoiding isolationist policies. The vision of self-reliance has evolved since early attempts in the 1950s that deprived India of modern technology due to strict import controls.

1. Rs. 20 Lakh cr Package of GOI.
UPSC CSE Mains – GS III – Economic Development.
By Phunkha Boro.

2. Practice Question
• Discuss the renewed emphasis of the government on self reliance via
the “Atmanirbhar Bharat Mission” with special focus on import
substitution as well as the challenges there in and also throw a light
on the evolution of the vision of self reliance in India post
independence.

3. Why is such a move needed ?
• The economy is going down. The MSMEs are in the need of a huge
amount of credit to revive their business which is crucial provided the
MSME sector contributes 30% to the Indian GDP.
• The Power Distribution companies had been unable to pay Rs. 50,000
crore to the Individual Power Producers. Because the revenue of the
Discoms had plummeted due to decline in energy consumption in the
economy.
• The poor section of the populace need cash at hand to survive
because of the lockdown.
• To give effect to the ambition of “Atnirbhar Bharat”.

4. Rationale of govt. step.
• Under these conditions, the Government of India has announced 20
lakh cr. Fiscal package amounting to 10 % of India’s GDP. India’s
GDP is Rs. 200 Lakh Cr.
• Out of this 20 lakh cr. a large portion is accounted by the monetary
measures taken by the RBI in the form of LTRO of Rs. 1 Lakh crore
and Rs. 50,000 of liquidity window for the NBFCs taken up in the
recent past.
• Govt. has also initiated a mission named “Atmanirbhar Bharat”.

5. Let’s Break it down
• There are 45 lakh units of MSMEs in India and they will be able to
avail collateral free loans irrespective of the risks associated. Rs. 3
Lakh Crore is allocated for this purpose.
• These loans will be covered under Credit Guarantee Scheme (CGS) of
Rs. 45,000 crore. Which means that risk averse banks will also be able
to lend money to even the MSMEs low credit rating. The govt. will
pay the banks in case the MSME unit defaults on their loan
repayment.
• Plus, a scheme of Rs. 20,000 crore of subordinate debt.

6. Let’s Break it down
• This fiscal package also includes a scheme of equity infusion in the
MSME Units up to Rs. 50, 000 Crore. This will bring working capital
to the MSMEs and infuse the required level of investment to ramp up
production & Services. This is necessary if we want to attain self
reliance.

7. For General Business
• TDS ( Tax deduction at source ) and TCS (Tax Collection at Source)
have been reduced by 25 %.
• Reduction in TDS will boost the money available with the business
enterprises concerned because the tax rate has been reduced.
• Reduction in TCS will make goods and services concerned less
expensive, thus a relief to the consumers.

8. PF Contribution Reduced
• The provident fund contribution by the employee and the employer has been
reduced to 10% from the current 12%.
• This will make more cash or income available at hand of the employee and
employer which can help in boosting demand in the economy thus fuelling the
supply and production of goods and services.

9. For the DISCOMs
• DISCOMS had an outstanding due to the Power Producers worth Rs. 50000
crore. The Power Producers were running out of liquidity & working capital to
purchase coal and other inputs required for power production
• Rupees 90,000 crore liquidity window for the Discoms is arranged to prevent
them from piling up Non Performing Assets (NPAs) with the banks and help
them pay their dues to the “Power Producers”.
• This will bring a relief to the Power DISCOMS.

10. For Atmanirbhan Bharat Mission?
• The government has focused on the import substitution but without resorting to
isolationist and exclusionist policy but rather to shield our economy against
any future external shock that may arise from disruptions in the supply chain
and market at the global level.
• Because we, including the US and others, were too dependent on China for
inputs for electronics and Active Pharmaceutical Ingredients (APIs). China is
taking the advantage now.
• Through this fiscal package GOI has decided not to allow global tender worth
200 crore for government procurements.

11. Challenges to Atmanirbhar Bharat.
• The labour laws will need an overhaul. There are 47 and more than 200 state
laws governing different aspects of labour ecosystem in India. We will need to
make them simplified.
• To ramp up manufacturing in India, there is a need of the required infrastructure.
Making quality goods available at a competitive price is a big challenge.
Because we have not banned import if a particular product can be imported at a
cheaper cost. People may still resort to import.
• Innovative solutions to manufacture goods must be given a top priority.
• Industrial policy should be redesigned to bring equal development across the
country to avoid fragmented development.
• Agriculture and the allied sectors should also be given priority to sustain
domestic manufacturing without importing the raw materials.

12. Challenges to Atmanirbhar Bharat.
• Efforts must go on to improve our EODB ranking so that foreign firms too set up
their units here keeping in view the goal to have an edge over China. Contract
Enforcement difficulty has to be eased and time taken for registration of
property should be reduced. As in these two pillars we are not performing well
in the EODB report. Land acquisition process should be simplified but that’s
easier said than done. Scrapping the labour laws is not a solution.
• Robust credit facility is a must in this case. Because firms will need a huge
amount of money.
• Easy environmental and other clearances will be needed but that comes at an
environmental cost.
• To prevent this mission from being a damp squib concrete steps must be taken
on the ground and only political rhetoric will render it a pie in the sky.

13. Evolution of the goal of Self Reliance.
• After independence, India attempted to attain self reliance in both manufacturing
goods and food stuff. In the second five years plan, also known as
Mohalanobis plan, focused on capital goods industries to attain self reliance in
other sectors of the economy.
• At that time, govt. wanted to import as less as possible and imposed restrictions
on imports. Foreign investment and firms were not allowed. This deprived
Indian manufacturing sector of attaining modern technology and competitive
edge in the Global Market. This transpired into too much focus on domestic
production via the PSUs which led to 1991 Economic Crisis.
• Fortunately, Atmanirbhar Bharat has not tinkered with FDI and import as such.
So we may hope to see ourselves inching towards self reliance if the timely steps
are taken.

14. Thank you !
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