Comprehensive economic package: A transformational moment
We have witnessed for the last few days the presentation of a comprehensive economic reforms - five days of briefing by the Finance Minister that covered in great detail an economic package covering almost all aspects of national economic life. The 20 lakh crore package is phenomenal - not just in terms of the sheer size of the money it pumps in to boost the economy, but also in terms of laying down a reformist vision for the future. The changes envisaged in economic policies and laws makes this exercise bigger than any usual annual budget. It is the recognition of the fact that it will take an exceptional effort to overcome a crisis of unprecedented global order.
Prime Minister Shri Narendra Modi gave a call for Atmanirbhar Bharat or Self-Reliant India with five pillars – Economy, Infrastructure, System, Vibrant Demography and Demand. He announced that the government will bring a Special Economic Package of Rs 20 lakh crores - equivalent to 10% of India’s GDP - to cater to the needs of various sections including industry, MSMEs, labourers, middle class, industries and infrastructure. He said that it is time to become vocal for our local products and make them global.
Helping the poor first
On the first day of her presentation of details of the economic package, Finance Minister announced Rs. 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus. The package includes insurance cover of Rs 50 Lakh per health worker, and for the next 3 months, 80 crore poor people will be given benefit of 5 kg wheat or rice per person per month, 1 kg pulses for each household for free every month, 20 crore women Jan Dhan account holders will get Rs 500 per month and Gas cylinders, free of cost will be provided to 8 crore poor families.
The Central government increased MNREGA wage to Rs 202 a day from Rs 182 and increased budgetary support to the programme. It announced ex-gratia of Rs 1,000 to 3 crore poor senior citizen, poor widows and poor Divyang Pradhan Mantri Garib Kalyan Package. Government front-loaded Rs 2,000 to farmers under existing PM-KISAN, benefiting 8.7 crore farmers.
A slew of measures were announced to support the vibrant but vulnerable MSMEs. This included emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit and also revision of definition of MSMEs by upward revision of investment limit. Manipur, which has the highest number of MSMEs in the North East, will be hugely benefited from this push.
For Migrants and Urban Poor Government of India permitted State Governments to utilise State Disaster Response Fund (SDRF) for setting up shelter for migrants and providing them food and water and released Rs 11,002 crore of its contribution in advance to all States to augment funds in their SDRF. Hygienically prepared three meals a day is being provided for the residents of Shelters for Urban Homeless (SUH) during the lockdown w.e.f March 28, 2020. Labour Codes will be modified to benefits workers. This includes universalization of right of minimum wages and timely payment of wages to all workers including unorganized workers (presently minimum wage is applicable to only 30% of workers).
The next set of announcements were meant to strengthen Agriculture Infrastructure, Logistics, Capacity Building, Governance and Administrative Reforms for Agriculture, Fisheries and Food Processing Sectors. This included Rs 1 lakh crore Agri Infrastructure Fund for farm-gate infrastructure for farmers, Rs 10,000 crore scheme for formalisation of Micro Food Enterprises, Rs 20,000 crore for Fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY), National Animal Disease Control Programme and setting up of Animal Husbandry Infrastructure Development Fund of Rs. 15,000 crore. Government also announced that there will be Amendments to Essential Commodities Act to enable better price realisation for farmers and Agriculture Marketing Reforms to provide marketing choices to farmers. Majority of Indians are directly or indirectly dependent on agriculture sector and a revolutionary change here is sure to transform the country and raise the quality of life for all its citizens.
Finance Minister next announced structural reforms in the eight sectors - Coal, Minerals, Defence production, Civil Aviation, Power Sector, Social Infrastructure, Space and Atomic Energy. This is to ensure competition, transparency and private sector participation to enable the achievement of PM’s vision of self reliant India. The changes announced here are structural and will transform the entire sectors to give long lasting benefits to the nation.
Under ‘Make in India’ for Self-Reliance in Defence Production, government will notify a list of weapons/platforms for ban on import with year wise timelines; indigenisation of imported spares and there will be a separate budget provisioning for domestic capital procurement. FDI limit in the defence manufacturing under automatic route will be raised from 49% to 74%. For efficient Airspace Management for Civil Aviation restrictions on utilisation of the Indian Air Space will be eased so that civilian flying becomes more efficient. This will bring a total benefit of about Rs 1000 crores per year for the aviation sector. Government also announced 13 more World-class Airports through PPP and there is a push to make India a global repairing hub for aircrafts.
The list of reforms and interventions that have been announced this week is long, but the message is clear. The economic system is being overhauled to meet the vision of a vibrant, self reliant country even as the government is doing its best to convert the present crisis into an opportunity.
The author is Director of PIB, Imphal