Atmanirbhar Bharat Abhiyan Economic Relief Package

Atmanirbhar Bharat Abhiyan Economic Relief Package
16 July 2020

Atmanirbhar Bharat Abhiyan Economic Relief Package

The Indian Prime Minister, in his address to the nation, announced the Atmanirbhar Bharat Abhiyan package or Self Reliant India Movement worth Rs Twenty lakh crore. To help in reducing the ongoing COVID-19 and to provide a much-needed boat towards attaining Atmanirbhar Bharat, he declared a special economic and comprehensive package of Rs Twenty Lakh Core which is equivalent to ten per cent of India’s Gross Domestic Product (GDP).

The government also took this opportunity to re-package some of the old measures, and promote some new reforms such as in public sector enterprises, agriculture, which has been pending for a long time. This economic relief package also comprises the already declared Rs 1.70 lakh crore relief package, as the Pradhan Mantri Garib Kalyan Yojana (PMGKY), for the poor to overcome troubles caused by the COVID-19 pandemic and the lockdown inflicted to check its spread.

The intended motive of this plan is two-fold. First, interim measures such as direct cash transfers and liquidity infusion for the poor will work as shock absorbers for those in acute tension. The second is the long-term reforms in growth-critical sectors to make them globally attractive and competitive.

The Indian Prime Minister also announced that a self-reliant India or an Atmanirbhar Bharat should stand on the following five pillars which are as below :

  1. Economy
  2. Infrastructure
  3. 21st-century technology-driven system
  4. Demand
  5. Demography

The package emphasises on four key components which are as below :

  1. land
  2. labour
  3. liquidity
  4. laws

The package includes some of the following sectors which are as under :

  1. MSMEs
  2. Cottage Industries
  3. Middle Class
  4. Labourers and farmers
  5. Industry

Under this package, Several reforms are declared to make India a self-reliant economy and reduce negative effects in the future. Some of the reforms are as under :

  1. Simple and clear laws
  2. Rational taxation system
  3. Supply chain reforms in agriculture
  4. Capable human resources
  5. Robust financial system

As stated by the Indian Prime Minister, the significance of this package will be that the Atmanirbhar Bharat Abhiyan package will help restore every sector of the Indian economy including the manufacturing sector and the demand and supply chain. This package will form the path for the revival of the Indian economy, which will, in turn, play a pivotal role in making India self-reliant.

The Finance Minister announced four tranches of the economic relief package which are as under

The first tranche comprises sixteen specific announcements and they spanned across the NBFC, MSME, real estate, power sectors, etc and some of them are as under :

  1. The rates of Tax Collection at Source (TCS) and Tax Deduction at Source (TDS) have been cut by 25% for the next year.
  2. PF payments have been decreased from 12% to 10% for both employers and employees for the next three months.
  3. Extended deadline for income tax returns for the financial year 2019-20 (due date pushed to 30 Nov 2020)
  4. The definition of an MSME is being expanded to enable for higher investment limits and the insertion of turnover-based criteria.
  5. The central public sector enterprises and the government will release all funds due to MSMEs within 45 days.
  6. Provision of Rs Twenty thousand crore as subordinate debt for Two lakh MSMEs which are deemed non-performing assets or stressed.
  7. Rs Thirty thousand crore special liquidity scheme, under which investment will be made in investment grade debt papers of NBFCs.
  8. Partial credit guarantee scheme extended under which the government guarantees twenty per cent of the first loss to the lenders — NBFCs, HFCs and MFIs with low credit rating.
  9. UTs and States have been advised to extend the registration and completion date of real estate projects by six months.

The second tranche aims at providing free food grains to migrant workers who do not possess ration cards. Some of the announcements in this regard are the following as under :

  1. a. The Centre will spend Rs. 3,500 crore for providing free food grains for migrant workers without ration cards for the next two months. This is an extension of the Pradhan Mantri Garib Kalyan Yojana (PMGKY).
  2. States are ordered to enrol migrant workers returning to their native places in the MGNREGA scheme.
  3. Small businesses who have taken loans under the MUDRA-Shishu scheme, meant for loans worth Rs. 50,000 or less, will receive a two per cent interest subvention relief for the next year.
  4. Street vendors will be provided with access to easy credit through an Rs. 5,000 crore scheme, which will offer Rs. 10,000 loans for initial working capital.
  5. The credit linked subsidy scheme for lower-middle-class housing under Pradhan Mantri Awas Yojana (PMAY) will be extended by one year to March 2021.

The third tranche of the economic relief package focuses on agricultural marketing reforms. Some of the announcements made in this regard are the following as under :

  1. Plans to enact a central law to allow barrier-free inter-State trade of farm commodities and e-trading which will enable farmers to sell produce at attractive prices beyond the current mandi system.
  2. The Centre will be deregulating the sale of six types of agricultural produce, including edible oils, cereals, pulses, oilseeds, onions and potatoes, by amending the Essential Commodities Act, 1955.
  3. Investment of Rs. 1.5 lakh crore to build farm-gate infrastructure and support logistics requirements for livestock farmers, fish workers, vegetable growers, beekeepers and related activities.

The fourth and final tranche focuses on the sectors of aviation, defence, power, atomic, mineral and space. There is a great emphasis on privatisation. Some of the announcements in this regard are the following as under :

  1. The Foreign Direct Investment (FDI) limit in defence manufacturing under automatic route will be increased from 49% to 74%.
  2. Ordnance Factory Boards (OFB) would be corporatized and listed on the stock market to improve efficiency, autonomy, and accountability.
  3. The private sector would be permitted to bid for fifty coal blocks. Private players would also be permitted to undertake exploration activities.
  4. The government monopoly on coal would be abolished with the introduction of commercial mining on a revenue-sharing basis.
  5. The government will ease geospatial data policy to make remote-sensing data more widely accessible to tech entrepreneurs, with safeguards put in place.
  6. A level playing field for private players will be created in the space sector, enabling them to use ISRO facilities and participate in future projects on space travel and planetary exploration.
  7. Measures to ease airspace restrictions have been declared which would make flying more efficient.
  8. Power departments/utilities and distribution companies in U.T.s would be privatized based on a new tariff policy to be announced.
  9. Research reactors in PPP mode would be set up for the production of medical isotopes.