The government finally rolled out relief measures to save the Indian economy by the bell.
On Monday, Finance Minister Nirmala Sitharaman tipped struggling sectors with a Rs 6.3-lakh crore boost to help survive the second wave of Covid-19, but policy watchers poring over crisp details pounced on the fact that the government was talking a good game.
Unlike last year's package focusing on limited areas, Sitharaman attempted to sweeten the stimulus pot this time by covering contact-intensive sectors like tourism, micro-finance institutions (MFIs), and exporters by offering cheap credit.
Refreshingly, the announcements were bucketed as old and new either for brevity or to shoot down post-announcement criticism. Still, the bottom line was that Monday's Rs 6.3 lakh crore package had little fiscal component, with much of it comprising credit guarantees and the rest involving budget allocations. Initial estimates pegged government's actual outgo to be a little over Rs 1 lakh crore, while the rest will be borne by banks.
Predictably, markets weren't one whit enthused with Sensex and Nifty ending in the red.
That said, Monday's package packed more wallop due to the much-needed attention on health, whose FY22 budget allocation was deemed grossly inadequate. The country's brutal suffering due to lack of equipment, medicines, and ambulance services during the second wave is still fresh and the government seems to have now wised up. An additional Rs 23,220 crore was directed towards health expenditure, with special emphasis on paedetric care. This sum, Sitharaman stressed, will be spent within this fiscal.
Besides this, she extended Rs 50,000 crore credit guarantee cover for health sector, where borrowers can take up to Rs 100 crore each with interest rate capped at 7.95% for three years. The move is aimed at scaling up medical infrastructure targeting underserved areas.
Struggling services sectors, including the collapsed tourism needs a dose of salts, and so the government offered a new loan guarantee scheme facilitating working capital and personal loans to 11,000 registered tourist guides, travel and tourism stakeholders. While travel agencies can avail up to Rs 10 lakh, tourist guides can borrow up to Rs 1 lakh without any processing and prepayment charges. Crucially, such loans will need no fresh collateral.
The relief measures for toursim sector also has another appealing ring to it. The government has chucked in Rs 100 crore to grant free tourist visas to 5 lakh tourists free of charge. Perhaps the move aims at reviving demand and as officials explained, though visa fee doesn't cost a bomb, it influences travel decisions.
The FM also announced another Rs 60,000 crore credit guarantee for Covid-affected sectors with interest rates capped at 8.25% as against the prevailing 10-11%.
The Emergency Credit Line Guarantee Scheme (ECLGS) launched last May is bumped up with an additional Rs 1.5 lakh crore outlay. With Monday's dole, the total ECLGS component enlarges to Rs 4.5 lakh crore.
For the first time, MFIs, who are often far away from the ear of power, got some token love. Sitharaman's Rs 7,500 crore credit guarantee scheme will be provided to banks for existing NBFC-MFIs or MFIs for on lending up to Rs 1.25 lakh to about 25 lakh small borrowers. Interest rate will be capped at MCLR plus 2% with maximum loan tenure of 3 years. The upshot is, this is for new lending and not repayment of old loans and interestingly, borrowers with pending dues up to 89 days too can avail credit.
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The Atmanirbhar Bharat Rozgar Yojana launched last October to incentivize employers is now extended till March 2022 with an approved outlay of Rs 22,810 crore for 58.50 lakh estimated beneficiaries, while an additional subsidy for Rs 14,775 crore is being provided for nutrient-based subsidy taking the total allocation to Rs 42,275 crore in FY22. As for Pradhan Mantri Gareeb Kalyan Anna Yojana (PMGKAY) launched last March 2020, it will see an additional spending of Rs 93,869 crore taking the total cost to Rs 2.28 lakh crore.
Turning to income growth and employment, Sitharaman shared a few slides about doubling of farmers income thanks to the supply of bio-fortified seeds that will improve crop yields. But the FM was spectacularly tin-eared about falling incomes and job losses in other sectors.
Some of the other announcements include a Rs 33,000 crore boost for project exports and Rs 88,000 crore insurance cover for merchandise exports, Rs 19,041 crore for BharatNet providing broadband connectivity to all villages and extension of tenure of Production-linked incentive (PLI) scheme for large-scale electronics manufacturing till FY26.