Finance Minister Nirmala Sitharaman announced a slew of economic packages and schemes for the ease of people, businesses, farmers, migrants and states during the COVID-19 spread.
A total of five tranches were announced over a period of a week.
The country is going through a difficult time and these initiatives from the government will help all sectors to combat the crisis and move ahead.
Here is a snapshot and the key takeaways from each of the tranches-
– This focused on a historic package and stimulus for the MSMEs sector to enhance, grow and build self reliance in India. The ‘Aatmanirbhar Bharat Abhiyan’ is based on 5 pillars – Economy, infrastructure, system, vibrant demography and demand.
– 45 lakh industries will get benefited.
– This comes as part of the Rs 20 lakh crore economic relief package announced by Prime Minister Narendra Modi to handle the devastating impact of COVID-19 pandemic and the lockdown on the Indian economy.
6 packages for the MSME sector are as follows:
1) Collateral-free Automatic Loan for MSMEs: The finance ministry announces 3 lakh crore collateral-free automatic loan for MSMEs.
This loan is for 4 year tenure and is 100 per cent guaranteed. This will last till October 21, 2020. It will benefit 45 lakh units, allowing them to resume activity and safeguarding jobs.
2) FM Sitharaman announced Rs 20,000 crore loan for stressed MSMEs. The provision of Rs 20,000 crore as subordinate debt, which will benefit 2 lakh MSMEs will also be provided.
3) For MSMEs needing handholding, a Rs 50,000 crore infusion will be made through ‘fund of funds’, to expand their capacity.
4) Revision of the definition of MSMEs has been changed. Investment limits to be revised upwards with necessary amendments to the law being made. Distinction between manufacturing and service will be eliminated.
5) Global Tenders will be Disallowed for government procurement – Upto Rs 200 crore Will help MSMEs to do business with confidence. Make in India will be promoted.
6) E-linkages to be provided to all MSMEs so that they can participate in trade fairs.
The Government of India and Central Public Sector Enterprises (CPSE) will honour every MSME receivable in the next 45 days.
– Apart from this, Rs 2500 crore EPF Support package was also announced to ease financial stress for businesses and workers for 3 more months.
1) EPF contribution reduced for businesses and workers for 3 months. Rs 6,750 crore liquidity support to be given.
– PF contribution reduced to 10% for employee and employer for next 3 months. CPSEs/States PSUs will continue at 12%.
– Due date of all I-T returns for FY19-20 from July 31, 2020 and October 31, 2020 extended till November 31, 2020.
– Tax audits extended from September 30, 2020 till October 31, 2020.
In the second day of the Finance Ministry briefing, FM Sitharaman concentrated on migrant workers, street vendors, self-employed and small farmers.
A total of 9 steps were spoken about:
3 for migrant workers
1 Shishu loan
1 street vendors
1 employment generation for tribals
2 farmers specific
The new schemes are as under-
– 25 lakh new Kisaan credit cards will be sanctioned.
– 63 lakh loans of 86,600 crores approved in the agriculture sector between March 1, 2020, and April 30, 2020.
– Shelters set up for migrants by state governments from the SDRF funds provided by the centre in the last 2 months.
There were, however, Legitimate concerns for migrants going back to villages during this time. Hence for them, the following schemes have been initiated –
1. Generated 14.62 crore person-days of work generated till 13 May 2020
2. Drive being undertaken to enroll returning migrants
3. Average daily wage date rises to Rs 202/-
– Extension of ESIC coverage to employees working in establishments with less than 10 employees on a voluntary basis to be made.
– Free food grain supply to migrants for the next 2 months.
– People who are non-card holders (state-level cards or NFSA holders) – will be given 5 kgs grains per person and 1 kg chana per family per month for two months.
– 8 crore migrants (as per state data) will benefit from this.
– Rs 3500 crore will be spent on this intervention for 2 months. Will reach the migrants through state governments – They will identify, provide grains and ensure the procedure is followed.
– One nation one ration card – technology systems to be used to enable migrants to access the public distribution system (ration) from any fair price shop in India by March 2021. Migrant workers can access food in other states also.
– 100% national portability to be achieved by March 2021.
– Affordable rental housing complexes for migrant workers/urban poor to be set up.
– Government to launch under PMAY for migrant labour/ urban poor to provide ease of living at an affordable rent.
– Rs 1500 crore interest subvention for MUDRA Shishu loan.
– For Street vendors – Rs 5000 crore special credit facility to be given. Initial working capital up to Rs 10,000 to be given.
– Rs 70,000 crore boost to the housing sector for the middle-income group (annual income Rs 6-18 lakh), through the extension of CLSS. The scheme extends till March 2021.
– 2.5 lakh middle income families will benefit from this. It will also create jobs for them.
– Rs 30,000 crore additional emergency working capital funding for farmers through NABARD. Will benefit around 3 crore farmers. To meet post-Rabi and current Kharif requirement in May/June.
– Kisaan credit card – nearly 2 lakh crore credit flow to cover to 2.5 crore farmers in the form of credit cards. Fishermen and animal husbandry will also be covered.
Finance Minister Nirmala Sitharaman specified that on the third day, the focus is on agriculture, food processing and allied activities, that are the backbone of the country.
– 1 lakh crore Agri-infrastructure fund for farm-gate infrastructure for farmers and aggregator points.
– Rs 10,000 crores scheme for the formalisation of Micro Food Enterprises (MFE): Scheme will benefit 2 lakh MFEs and will promote ‘vocal for local with global outreach’. Cluster based approach will be adopted.
– Rs 20,000 crore for fisherman through Pradhan Mantri Matsya Sampada Yojna (PMMSY). Will lead to additional fish production of 70 lakh over 5 years. Employment to over 55 lakh persons and will double exports to Rs 1 lakh crore.
– National Animal Disease Control Programme: The outlay of Rs. 13, 343 crores will help handle the foot and mouth disease common in animals. About 1.5 crore cows and buffaloes will be vaccinated and tagged.
– Rs 15,000 crore will be spent on animal husbandry infrastructure development fund. Incentives to be given to establish plants for the export of niche products. Aim to support dairy processing.
– Promotion of herbal cultivation with an outlay of Rs. 4000 crore. This will lead to Rs. 5000 crore income generation for farmers. NMPB will bring 800-hectare area by developing a corridor of medicinal plants along the banks of river Ganga.
– Rs 500 crore for beekeeping initiatives. Will lead to income for 2 lakh beekeepers.
– Rs. 500 crore for Operation Green: to be extended to all fruits and vegetables. A pilot for 6 months.
Apart from the above, three more reforms have been announced.
– Essential Commodities Act will be amended to enable better price realization for farmers.
– Agriculture marketing reforms to provide marketing choices to the farmers. Barrier-free inter-state trade and e-trading of agriculture produce will be allowed. He doesn’t have to only sell to the licensees in APMCs.
– Agriculture produce price and quality Assurance: farmers lack mechanism for predictable prices of crops at the time of sowing. He needs to be given assurance of a price in advance. A facilitative legal framework will be created to enable them to fix their own fair price. Will enhance standardization and assurance for a farmer’s crop and will mitigate risks.
The fourth tranche was related to ‘structural reforms’ in the sectors of coal, minerals, defence production, airspace management, airports, MRO, power distribution companies in UTs, space, and atomic energy.
FDI limit in Defence manufacturing under automatic route will be raised from 49% to 74%. A time-bound defence procurement process and faster decision making will be ushered in by setting up of a project management unit to support contract management, by a realistic setting of General Staff Qualitative Requirements (GSQRs) of weapons/platforms and by overhauling trial and testing procedures.
Further, in a bid to enhancing self reliance in defence production, the government will notify a list of weapons/platforms for ban on import with year wise timelines. There will also be an indigenization of imported spare and a separate budget provisioning for domestic capital procurement. All of this is expected to reduce the defence import bill.
– Civil Aviation
With only about 60% of Indian airspace freely available, airlines usually fly longer routes. In a bid to rationalise this, the FM has announced an easing of restrictions on utilisation of Indian air space which will make civilian flying more efficient. The Government hopes to get a benefit of Rs 1,000 crore annually via this move.
Government will now introduce commercial mining in coal sector. There will be a exploration-cum-production regime for partially explored blocks. As against earlier provision of auction of fully explored coal blocks, now even partially explored coal blocks will be auctioned. Private sector participation will be allowed in exploration. Production earlier than scheduled will be incentivized through rebate in revenue-share. The govt will offer nearly 50 blocks immediately with no eligibility conditions, but only upfront payment with a ceiling.
The private sector will be allowed to use ISRO facilities and other relevant assets to improve their capabilities.
Also, future projects for planetary exploration and outer space travel will be opened to private sector. Private participation in space activities will be encouraged by providing level-playing field for private companies in satellites, launches and space-based services. The government also plans to provide predictable policy and regulatory environment to private players
– Atomic Energy
The government will establish a research reactor in PPP mode for production of medical isotopes to promote welfare of humanity through affordable treatment for cancer and other diseases.The government will also establish facilities to use irradiation technology for food preservations, again in PPE mode. This technology will compliment agricultural reforms and assist farmers. The government will also link India’s robust start-up ecosystem to the nuclear sector to foster a synergy between research facilities and tech-entrepreneurs.
– Social Infrastructure Projects
The government will revamp the Viability Gap Funding Scheme to boost private sector investments in social-infrastructure projects, like hospitals. The total outlay for this has been pegged at Rs 8,100 crore. Projects will be proposed by Central Ministries/State governments and statutory entities.
FM Sitharaman in her 5th and final tranche of economic package announcement emphasised on issues like environment, health, education, businesses and COVID-19 and decriminalization of the Businesses Act.
A total of 7 steps were outlined–
Step 1 – Rs. 40,000 crore increase in allocation to MGNREGA to provide employment boost.
Step 2 – Ramping up the health reforms and initiatives:
A) Investments in rural areas to be increased. Preparing India for future pandemics. All districts to be strengthened with labs.
B) Technology driven education will be focused on. Literary enhancement along with psychological support will be prime.
Step 3 – Further enhancement of ease of doing business through IBC (Insolvency and Bankruptcy code) related measures. Special insolvency resolution framework to be communicated soon. Insolvency threshold raised to 1 crore.
Step 4 – Decriminalize Companies Act defaults: minor technical and procedural defaults will be decriminalized.
Step 5 – Ease of doing business for corporates: direct listing of securities by Indian public companies in permissible foreign jurisdiction.
Step 6 – All sectors will be open to private sectors also. A new coherent policy will be in place. Public sector enterprises will continue to function, and their presence will be defined. In notified strategic sectors, not more than four enterprises will be allowed to function.
Step 7 – Supporting State Govt: Rs. 46,038 crore devolution of taxes was given fully as if budget estimates were valid. Other monetary support also extended. Borrowing increased from 3% to 5%. Apart from this, part of the borrowing will be linked to specific reforms. This will ensure sustainability, safeguard interests of the farmers, job creations and promote urban development.