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Call it COVID-19 economic exit plan or Covid Relief Package, the fiscal stimulus of a whooping Rs. 20 lakh crore by the Prime Minister Narendra Modi indeed is perhaps the world’s single biggest fund-injection done by a country of the world in the Corona-time.
This certainly will act as a Game Changer for Indian economy both from the micro and macro angles. This can be gauged from the fact that this package is around 10% of the total GDP of India. In other words, this is the most sustainable economic reach-out ever done in a country.
Aiming at arresting the sharp downturn in economy caused by the months of lockdown and global meltdown in the areas of trade and commerce, this real-time package has justifiably been termed as an Abhijan (journey) for an Atmanirbhar Bharat (self-dependent India).
The efforts of Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman to put the national economy on track is very timely as this Rs 20 lakh crore stimulus package will not only increase liquidity but also ease out flow of capital for the companies with easy-term loans.
After the planned era began in India in 1951, this is the biggest historic injection of cash in the economy to combat a special critical situation arising out of outbreak of a pandemic.
After the special bailout financial packages announced by the USA which is 13% of its GDP and by Japan, which is over 21% of its GDP, this is the biggest economic measure taken by India.
Covid Relief Package: An Analysis
The package becomes meaningful as it includes a non-business provision of Rs 1.7 lakh crore for free food grains to poor and cash to poor women and elderly.
On the other hand, the cut in interest rates and liquidity boosting measures totaled to 3.2 per cent of the GDP (about Rs 6.5 lakh crore) announced by the Reserve Bank of India will go a long way in sustaining the economy burying the panic among business people.
In fact, such a bold step was the need of an hour as the economic activity across India had come to a standstill following the unprecedented countrywide lockdown. Everybody in India including migrant labour, small kiosk-sellers, agriculturists, lower income group and middle class suffered cash losses.
With no activities in their factories and finished product facilities, the tycoons and corporate kings also found their income suddenly coming to a stop. It is in this backdrop that all the state governments and the centre found their tax accruals abruptly halting.
What is most remarkable about this package is the fact it touches all: extending support to all tiers of production including the cottage industry, MSMEs, labourers, industries and middle class.
The Finance Minister Nirmala Sitharaman played a key role in explaining all provisions of this package through the media.
On making a broad analysis of this Atmanirbhar Bharat Package from both micro and macro level economic standpoint, we find it has Four Parts, or tranches of stimulus to be more technically right.
How the Package Brightens Scope of Investments
This is a very timely move to rekindle hope among the investors. The tax exemption is a revolutionary and long needed stimulus needed in India to induce investment.
The Central Government is going to facilitate collateral-free loans to the tune of Rs 3 lakh crore for the MSMEs. In a revolutionary step, these loans will be for a four-year period and the borrowers won’t have to pay the principal amount for 12 months.
The government itself will stand guarantor for such loans. With it, the companies lying closed or suffered huge losses due to lockdown can now restart or open new businesses in the MSME sector. The Fund of Funds announced envisages an injection of Rs 50,000 crore in the MSME sector through equity investments by the government.
To boost the Make in India, the tenders of up to Rs 200 crore will not be global tenders, thus not be allowing foreign bids for them.
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