Ahead of Diwali, Union Finance Minister Nirmala Sitharaman on Thursday rolled out 12 measures as the Atmanirbhar Bharat 3.0 stimulus package to boost the economy.
She announced a package worth Rs 1.2 trillion. If Wednesday’s production -linked incentive package is added, the stimulus comes to Rs 2.65 trillion.
Some measures include a credit guarantee support scheme for medium and small businesses across 26 stressed sectors with a specific call-out for the health care sector; employment generation in both formal and informal segments; tax relief for real estate developers and home buyers; ease of doing business by relaxing criteria of locking up capital in infrastructure contracts; and fertiliser subsidy to farmers.
This stimulus comprises production-linked incentives approved by the Cabinet on Wednesday for as many as 10 sectors, which will be operational for five years with an estimated outlay of Rs 1.45 trillion.
The fresh measures are an extension of a relief package announced in May, under Atmanirbhar Bharat, although the earlier measures could not help much in boosting demand because they focused more on providing liquidity and credit-free collaterals.
“I would like to announce a few new measures in the series of stimulus announcements we have been doing ... quite a few indicators showing a distinct recovery in the economy,” the minister said during the stimulus announcement.
On the additional stimulus expenditure, she said a “total of Rs 29.87 trillion or 15 per cent of gross domestic product (GDP) is what has been given as a stimulus till today. Out of this the government’s share is 9 per cent.”
Under the fresh booster shot, the finance ministry has extended the timelines of credit support schemes for micro, small, and medium enterprises, considering that many companies are still scouting for funds.
Additionally, the finance ministry on Thursday included the 26 stressed sectors within the ambit of the emergency credit line guarantee scheme, as identified by the K V Kamath panel.
The Kamath Committee, appointed by the Reserve Bank of India, had identified 26 sectors that were directly impacted by Covid, like power, construction, iron and steel, roads, real estate, wholesale trading, textiles, consumer durables, aviation, logistics, hotels, and restaurants and tourism. These sectors have been reeling from the pandemic-induced lockdown.
These entities can avail of the scheme with outstanding credit of Rs 50-500 crore.
The scheme allows entities to avail of credit up to 20 per cent and repayments can be done in five years (a one-year moratorium on loans plus four more years to repay the amount). “Most of measures announced by FM would tend to work more on medium- to long-term, especially for the PLI schemes, infrastructure, and exports. However, measures addressing the issue of employment and to a certain extent for real estate sector would work immediately,” said Madan Sabnavis, chief economist at CARE Ratings.
To incentivise creating jobs and encouraging companies to consider re-hiring workers who may have lost their jobs during lockdown, a new Atmanirbhar Bharat Rozgar Yojana framework has been laid out. And, for the informal sector, the government decided to extend the PM Garib Kalyan Yojna to support low-income groups.
The Rozgar Yojana is for new employees hired by organisations registered by the Employees Provident Fund Organisation. The organisations will receive benefits during Covid-19. The FM said 24 per cent contribution of provident fund will be made by the government if the establishment has up to 1000 employees.
“The FM’s stress on farmers and workers in the informal sector through extending the PM Garib Kalyan Yojana promises to boost demand in the economy and support low-income consumers. Overall, a truly impressive package for all, in an economy inflicted by a global pandemic,” said Chandrajit Banerjee, director general, Confederation of Indian Industry.
To bring about an uptick in the purchase of residential property, the government has increased the threshold for the difference between the transaction value and the circle rate to 20 per cent from the current 10 per cent. This is effective from Thursday (November 12) till June 30, 2021, for primary sales of residential units up to Rs 2 crore. This is a second revision of the limit done by the government. Besides, an additional outlay of Rs 18,000 crore over the budget estimate towards the PM Awaas Yojana Urban has been announced.
Speaking on farmers, the FM said the credit boost had been given to 25 million farmers through the kisan credit card, where Rs 1.4 trillion was distributed to them. In continuation with relief measures, a subsidy of Rs 65,000 crore will be provided to enable accessibility in the next crop season. To make a push to the infrastructure sector, the government said it would make an equity investment of Rs 6,000 crore in the National Investment and Infrastructure Fund (NIIF), which will help it raise Rs 1.1 trillion by 2025 for financing infrastructure projects.
As part of ease of doing business, the FM said the performance security on government contracts in construction/infrastructure would be reduced to 3 per cent from 5-10 per cent. Earnest money deposits will not be required for bid tenders and will be replaced by a bid security declaration. The relaxations will be applicable till December 31 next year.
Citing the RBI’s latest remark on the economy, the FM said the RBI had predicted a strong likelihood of the Indian economy returning to growth in third quarter (October-December), ahead by a quarter of the earlier forecast. “Various unrelenting systemic reforms have helped in this," she said. On the new Moody’s assessment, the finance minister said even the global ratings had reassessed India's 2020 GDP growth at -8.9 per cent (as against -9.6 per cent earlier).
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