FM announces Rs265,000-cr fresh stimulus to Covid-hit economy
20 November 2020
Union minister of finance and corporate affairs Nirmala Sitharaman on Thursday announced a number of measures, involving a total outlay of Rs2,65,000 crore, as part of the government’s stimulus to the economy – the third such package aimed at rescuing the economy from the debilitating effects of the corona virus pandemic.
Announcing the measures at a press conference in the capital, Sitharaman said this will take the total stimulus announced by the government and the Reserve Bank of India till date, to help the nation tide over the Covid-19 pandemic, to Rs29,87,000 crore, which is 15 per cent of the national GDP. Out of this, stimulus worth 9 per cent of package has been provided by the government, she added.
Sitharaman also announced a new scheme to promote employment, callef the `AatmaNirbhar Bharat Rozgar Yojana.’ The scheme aims to incentivise job creation during Covid-19 recovery period by encouraging EPFO-registered establishments to take in new employees without EPFO registration or those who lost jobs earlier.
The Yojana will benefit any new employee joining employment in EPFO registered establishments on monthly wages less than Rs15,000 as also EPF members drawing monthly wage of less than Rs15,000 who made exit from employment during Covid pandemic between 1 March 2020 and 30 September 2020 and got re-employed on or after 1 October 2020.
For such employment, the central government will provide the total contribution towards Employees Provident Fund contribution, as subsidy for two years, in respect of new eligible employees in establishments employing up to 1,000 people, This includes employee’s contributions (12 per cent of wages) and employer’s contribution (12 per cent of wages). For establishments employing mpre than 1,000 people, only employee’s EPF contributions (12 per cent of EPF wages) will be given.
The scheme will be effective from 1 October 2020 and will be operational till 30 June 2021. For this, certain other eligibility criteria would have to be met.
MSME Loan Guarantee: For micro, small and medium enterprises the government has extended the Emergency Credit Line Guarantee Scheme for businesses loans, MUDRA borrowers and individuals (loans for business purposes) till 31 March 2021.
Boost To Healthcare: The government also announced the launch of a credit guarantee support scheme `ECLGS 2.0’ for the healthcare sector and 26 stressed sectors with credit outstanding of above Rs50 crore and up to Rs500 crore as on 29 February 2020 stressed due to Covid-19, among other criteria. Entities will get additional credit up to 20 per cent of outstanding credit with a tenor of five years, including 1 year moratorium on principal repayment. This scheme will be available till 31 March 2021.
Production Linked Incentives: Sitharaman announced a Production Linked Incentive (PLI) scheme worth Rs1,46,000 crore to 10 more champion sectors, which include: Advance Cell Chemistry Battery, Electronic/Technology Products, Automobiles & Auto Components, Pharmaceuticals Drugs, Telecom & Networking Products, Textile Products, Food Products, High Efficiency Solar PV Modules, White Goods (ACs & LED), and Specialty Steel.
This will give a big boost to economy, investment, exports and job creation. A total amount of 146,000.crore has been earmarked across sectors, for the next five years.
This is over and above the PLI schemes announced earlier.
Urban Dwellings: A sum of Rs18,000 crore is being provided for PM Awas Yojana- Urban over and above the Rs8,000 crore already allocated this year. This will help ground 1.2 million houses and complete 1.8 million houses, create additional 7.8 million jobs and improve production and sale of steel and cement, resulting in multiplier effect on the economy.
EMD Relief for Contractors: The government has decided to relax earnest money deposit and performance security requirements in government tenders for infrastructure and construction contracts.
This will provide ease of doing business and relief to contractors whose money wold otherwise remain locked up; performance security on contracts has been reduced from 5-10 per cent to 3 per cent. It will also extend to ongoing contracts and public sector enterprises. EMD for tenders will be replaced by Bid Security Declaration. The relaxations in the General Financial Rules will be in force till 31 December 2021.
I-T Relief for Developers & Home Buyers: In order to give income tax relief to home buyers and developers, the differential between circle rate and agreement value in real estate under Section 43 CA of I-T Act has been increased from 10 per cent to 20 per cent. This is for primary sale of residential units up to Rs2 crore (from date of announcement of this scheme, till 30 June 2021). Consequential relief of up to 20 per cent shall also be allowed to buyers of these units under section 56(2)(x) of I-T Act for the said period. The Income Tax relief provides incentive to middle class to buy homes.
Infra Fund: Government will make Rs6,000 crore equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF provide a credit line of Rs1,10,000 crore for infrastructure projects by 2025.
Enabling Farmers: As fertilizer consumption is going up significantly, Rs65,000 crore is being provided to ensure increased supply of fertilizers to farmers to enable timely availability of fertilisers in the upcoming crop season.
Rural Jobs: Additional outlay of Rs10,000 crore is being provided for PM Garib Kalyan Rozgar Yojana to provide rural employment. This will help accelerate rural economy.
Export Push: EXIM Bank will be provided Rs3,000 crore in fresh funds for promoting project exports under Indian Development and Economic Assistance Scheme (IDEAS Scheme). This will help EXIM Bank facilitate lines of credit development assistance activities and promote exports from India.
Defence Infrastructure: In order to capitalise and stimulate domestic defence equipment units, industrial infrastructure and green energy pojects, an amount of Rs10,200 crore additional budget stimulus is being provided.
Covid Action: Development of an effective vaccine against the Covid-19 pandemic is a sine qua non for any effort at revitalising the economy. Accordingly, an amount of Rs900 crore is being provided to the Department of Biotechnology for research and development of Covid vaccine.
Stimulus 3.0 – Highlights:
- A new scheme “Aatmanirbhar Bharat Rozgar Yojana” launched;
- Emergency Credit Line Guarantee Scheme for MSMEs, businesses, MUDRA borrowers and individuals extended till 31 March 2021, with additional credit of up to 20 per cent;
- Production Linked Incentive worth Rs1,46,000 crore will be provided to 10 champion sectors;
- Rs18,000 crore additional outlay for PM Awaas Yojana – Urban;
- Relaxation of earnest mony deposit and performance security on government tenders;
- Increase in differential between circle rate and agreement value to 20 per cent providing income tax relief for developers and home buyers;
- Rs6,000 crore equity investment in debt platform of National Investment and Infrastructure Fund (NIIF);
- Rs65,000 crore for subsidised fertilisers provided to support agriculture;
- Additional outlay of Rs10,000 crore has been provided for PM Garib Kalyan Rozgar Yojana;
- Rs3,000 crore boost to be given for project exports through assistance given by India to developing countries;
- Rs10,200 crore additional budget stimulus will be provided for capital and industrial expenditure; and
- Rs900 crore is being provided for research and development of Indian Covid vaccine.