On 12th May 2020, Narendra Modi ji announced a special economic package of INR 20 lakh crore to provide stimulus to the Indian economy on account of the unprecedented crisis bought in due to the COVID-19 crisis. His message was clear – to gun for a self-reliant India to make India strong once again. He called it the Aatmanirbhar Bharat Abhiyan. As part of this, Modi ji stressed that the focus will be on five key areas, namely economy, infrastructure, system, vibrant demography, and demand. The economic package amounts to approximately 10% of India’s GDP. This was one of the biggest economic relief packages announced world over and is certainly the right step in the direction of helping India to bounce back from this unprecedented crisis.
Over the last few days, Nirmala Sitharaman ji and Anurag Thakur ji announced all five tranches of the economic package. In this post, I will outline the major reliefs granted specifically in the area of agriculture, employment, and farming.
- The government has decided to provide direct support to the farmers. This will be achieved by assisting 3 crore farmers who have agri loans worth INR 4.22 lakhs crore availing the benefit of 3 months loan moratorium on such loans. Further, the interest subvention and prompt repayment incentive on crop loans which was due from 1st March 2020 have been extended up to May 31st, 2020. Working capital limit of INR 6,700 crore has also been sanctioned for procurement of agriculture produce to State Government entities since March 2020. This will definitely provide the much needed relief for the farmers who have been badly hit due to the COVID-19 crisis. I am confident that the issuance of 25 lakh new Kisan Credit Cards sanctioned with a loan limit of INR 25,000 crore will provide a big boost to better the plight of the farmers. What I would also like to emphasize on is that Modi ji’s thinking believes in empowering the sectors instead of simply giving them doles in the form of direct cash transfers. If we have to realize our dream of becoming self reliant, empowering all sectors of the economy is the first step in that direction.
- Turning our focus to agriculture which accounts for 17% of India’s GDP, some big-ticket support measures have been announced. First up is the agri-infrastructure fund that been created. The support will be provided through a financing facility of INR 100000 crore at farm-gate and aggregation points. This will strengthen the supply chain to a large extent and is a commendable step indeed as the focus on agri infrastructure has not been much in the past. Lack of sufficient cold chains and post-harvest management infrastructure are the major bottle necks in value chain. Money has also been allocated for improving the infrastructure for fisheries and shrimp cultivation along with improving the quality of animals for milk and meat production. As the support will help the Primary Agricultural Cooperative Societies, Farmers Producer Organisations, Agriculture entrepreneurs, Startups, etc., I am hopeful that the required impetus will be received at farm-gate & aggregation points. This measure is particularly beneficial for Himachal Pradesh as we have always wanted to fix the supply chain in Horticulture and food processing units. These measures will benefit us immensely and also go a very long way in enhancing our storage capacity
- The government has also allocated an additional INR 40,000 crore under MGNREGS. This will go a long way in generating nearly 300 crore person-days in total. I think this is a laudable step as it will lead to the creation of more jobs that will, in turn, boost the rural economy through higher production.
- A slew of reforms have been introduced in the MSME sector too. The definition of MSME has been revised increasing the scope for more industries to come under the revised criteria. INR 3 lakh crores worth of collateral-free automatic loans will be given to MSMEs. An emergency credit line will be allowed so that the MSMEs can avail up to 20% of their entire outstanding credit as on February 29, 2020 from banks and NBFCs. This will benefit the borrowers who have INR 25 Crores and turnover of Rs. 100 crores. The loan would be for 4 years with moratorium of 12 months on principal repayment. A 10% credit guarantee will be provided to cover to banks and NBFCs on principal and interest. Further, INR 20,000 crore will be provided as subordinate debt to MSMEs that have been classified as NPA or are stressed. A Fund of Funds (FoF) will be set up with a corpus of INR 10,000 crores. This will be helpful in providing equity funds for MSMEs that have growth potential and viability.
In addition to the above, several other structural reforms have been introduced. This included ease of doing business measures in India, reliefs under the Income Tax Act and Companies Act, Insolvency and Bankruptcy Code, as well as a host labour law reforms. All these timely steps will surely help Indian economy to spring back on its feet. Experts from UN have also lauded the package specifically as Julian Slotman, Associate Economic Affairs Officer, Economic Analysis and Policy Division, Department of Economic and Social Affairs noted that the package “seems to be of a magnitude that will help to reassure markets and to boost domestic consumption”. As Modiji also noted, these measures and reforms will certainly help to boost entrepreneurship, rural economy, and provide a big impetus to the growth trajectory.
