Economic Stimulus And Its Implication

The Prime Minister’s announcement on COVID-19 package for revival and survival encompassing all aspects of business, individuals and medical support for all Indians resonates very strongly with the statement J. Waitzkin made once when he said that we learn by pushing ourselves and finding what really lies at the outer reaches of our abilities. Finance Minister’s first tranche of the 20 lakh crore economic package

focused on SME/ MSME, incentives for cheap loans, fewer compliance, tax benefit and more support for the system thereby build a structure based on self-sufficiency i.e. Atamanirbhar approach. Some highlights of the announcements included:

The benefit to 80 crore people was envisaged in the form of pulses and food. In order to support the ailing discoms Rs 90000 crore liquidity is being provided. 5 crore registered workers with EPF can avail withdrawal facility up to 75% of their balance or 3 months salary whichever is less. Rs 3 lac crore collateral-free loan was extended as well. MSME and SME’s would be eligible for taking subordinate debts to total amounting to Rs 20000 crores.

The second tranche focused on labourers and farmers and to provide essential support to the migrants FM announcement that the government would offer 30000 crores worth of working capital loans to the farmers at concessional rates is indeed a bold move.

In the third tranche of measures under India’s COVID -19 relief package of Rs 20 lakh crore plan announced, the focus was primarily on agriculture and allied sectors.  One of the major announcements of the day was amendments in the essential commodities act whereby potatoes, onions, oil and cereals were in the purview. Eleven measures are being taken to bring in structural reforms and strengthening of the governance. Under PM Kishan Yojna, 18700 crores have been credited directly to farmers during the lockdown period. Special attention from commodity to cereal, vegetables to oil, micro-food products to herbal plants have been considered. Addressing storage, distribution and marketing of agro produce removing interstate barriers and providing fair price mechanism would enable farmers to garner better revenue along with the sustainable job. These measures of allocation of funds, initiatives for expansion and reforms through facilitation would give impetus to agriculture and rural economy.

In the 4th day of the series of the announcement, the FM focused on reforms in coal, aviation, atomic energy etc. The need for MRO in aviation and the importance of it to India was emphasized.

The last day announcements pertain to the public sector, core and strategic sectors reforms. It was also stated that not more than 4 companies would operate in any strategic sector. Rules are being framed to ensure ease of doing business. Listing of NCD with exchanges will be being treated as a listed company. Decriminalization in case of violations of company law. Allowing Indians, a direct listing of Indian companies in foreign jurisdictions was also proposed. The State Governments have been reeling with their own issues had demanded support from the centre. The central Government accepted their request by allowing them to increase the limit from 3% to 5%.

There are varied and differing views about the package being offered. The stimulus if deciphered has short-term measures and primarily addresses the marginalized community, MSME sector, cottage industry, farmers and agri related entities.

There are some keys steps like amending the Essential Commodities Act wherein cereals, oil, potatoes and onion will be out of the ambit. Farmers would benefit in terms of pricing and these measures may encourage help in deurbanization to some extent.

Structural reforms will hold India in good stead in the long run. Many of us are comparing these reforms with the stimulus given by developed countries, which would certainly be unfair. India’s federal structure requires centre and state to uniformly implement these strategies for the greater good. In terms of lockdown and health implementation country received support from different corners and stood undivided.

However, there was a discord where immigrants and economy were concerned These steps have not addressed the issues of the non-salaried middle class. The Government has balanced between giving immediate stimulus and using this adversity to look beyond so that India becomes self-sufficient and self-reliant. There is a general perception that these are announcements, which sound good in paper. The key to dispelling the views of such detractors would be to put full momentum on the implementation of such policies/reforms and administrative steps taken to capitalize on these announcements and making them a reality.