After one month of Atmanirbhar Bharat 2.0 GoI is back with the 3.0 package worth Rs 2.65 lakh Crore. Before checking out the latest announcements let's take brief look at 2 stimulus packages announced before.
One Nation - One Ration Card Nation wide roll out of the scheme. Aim is to promote the intra and inter state portability, mainly considering the migrant workers. Govt. want to ensure 100% portability by March 2021. So far 28 states/UTshave been brought under the umbrella.
PM SVANidhi(Street Vendor's Atmanirbhar Nidhi) Scheme is to empower street vendors by extending loans for their holistic development and economic upliftment. It intends to provide collateral free working capital loans of up to INR 10,000/- of one-year tenure, to resume their businesses in urban, peri urban and rural areas.
Kisan Credit Cards Farmers will be provided with institutional credit facilities at concessional rates.
Agri Infrastructure Fund Fund of INR 1Lakh will be created to boost the agriculture infra projects.
PMMSY(PM Matsya Sampda Yojna) Integrated, sustainable and inclusive development of marine and inline fisheries. INR 11,000 crore will be spent on activities in Marine, Inland fisheries and Aquaculture and INR 9,000 crore will be spent for developing related infrastructure.
Many such schemes launched to provide working capital funding for farmers through NABARD, credit free loans for MSME upto INR 3Lakh Crore(more than INR 2Lakh Crore is already sanctioned) under ECLGS where guarantee will be provided by National Credit Guarantee Trustee Company Limited (NCGTC). Various other measures were taken to inject more and more liquidity in market.
These announcements were made on Oct 12. So obviously govt. want to target the upcoming festive season to encourage the spending.
SBI Utsav Card Central govt. employees to get prepaid rupay card with INR 10,000. Amount is interest free and has to be paid back in less than 10 instalment.
LTC Voucher Govt employee can claim their LTC if they spend 3 times the fare 1 times the leave encasement before March 31, 2021. Items brought should be attracting more than 12% GST. This will lead to increase in GST collection and will increase the flow of money in the market.
INR 25,000 Crore provided as additional capital to Ministry of Road Transport and Ministry of Defense.
11 States have been sanctioned INR 3621 crore as interest free loan towards capital expenditure.
Again Govt is back with several announcements for job creation, provide more liquidity to stressed sectors and boost the investment in infrastructure sector. 12 announcements have been made.
Atmanirbhar Bharat Rozgar Yojna This scheme intends to incentivize formalization and employment creation in COVID recovery phase. Under this scheme beneficiaries are
- New joinee in EPFO registered establishment on monthly wages < INR 15000.
- Who lost their employment within March 1 to Sept 30, 2020 and employed after Oct 1, 2020.
Scheme to be operational till June 30, 2020 and central govt will provide subsidy benefits for next 2 years.
- Employing up to 1000 people Both employee's and employer's contribution(12% - 12%) totalling 24%.
- Employing more than 1000 people Only employee's contribution(12%).
Subsidy support to get directly credited in adhaar seeded EPFO account. FM informed that more than 95% of all establishments and 65% of all employees in the formal sector are estimated to be covered in the first category.
Extending ECLGS Scheme is originally announced in package 1.0 and now extended till March 31, 2021. Earlier deadline is November 2020. As on today 1.05 lakh crore is sanctioned to 61 lakh borrowers
Boost for PLI for 10 champion sectors GoI has already approved PLI schemes for 3 sectors(Mobile Manufacturing, API, Medical devices) at cost of INR 51,355 crore. It proves to be very successful in terms of attracting investment. And thus 10 more champion sectors will now be covered to boost the domestic manufacturing at the cost of INR 1.46 lakh crore for next 5 years.
Additional outlay for PMAY-Urban Rs 18,00 crore will be provided over the budget estimates to enable real estate sector to generate more employment. This will help 12 lakhs houses to be grounded and 18 lakhs to be completed. 78 lakhs additional jobs expected.
Support for Construction & Infrastructure Relaxation of Earnest Money Deposit(EMD) & Performance security on Govt tenders Lets understand performance security first - If govt issues some tender then after completion of project govt does not pay the full amount instead it will keep 5-10% as performance security deposit to ensure better quality. For example if govt issues tender of INR 1000 for some project then it will only pay INR 900 and will keep INR 100(10%) as deposit. This security deposit is educed to only 3%. This is also extended to ongoing contracts and PSE. This will help the contractors to save money and invest it in another project creating more employment.
Under this, EMD(small refundable fee from bidder to ensure he does not back out at the time of tender opening) will not required, replaced by bid security declaration(kind of self declaration)
Relaxation under this schemes will be given till Dec 31, 2021. This will be huge relief to contractors as it helps them to reduce burden and lockup of their capital.
Income tax relief for developers and home buyers Before understanding this announcement lets understand the concept of Circle Rate with example.
Whenever we buy some property we have to pay tax on it(stamp duty, etc). This tax is not calculated on the rate at which we bought that property but on the basis of circle rate. Circle rate generally follows the market value of that property, but sudden slowdown has led to decline in prices of residential unit. Circle rate is decided by conducting the survey in that area, so it will be different in different area. For example if I will buy property at INR 1000, and circle rate in my area is INR 2000, and stamp duty is 5%. Then I have to pay 100 Rs(5% of 2000) and not 50 Rs(5% of 1000). According to current law, it allows the differential of 10% from circle rate. That is in our case instead of paying tax on 2000(circle rate), I can pay tax on 1800(10% differential of 2000) which is 90 Rs(5% of 1800).
In this announcement differential increased from 10% to 20% till June 30, 2021. That is now I have to pay tax on 1600 Rs only. This measure will reduce the tax burden and helps contractors in clearing their unsold inventory. Govt is hoping that this will provide incentive to the buyers to buy the property.
Equity infusion in NIIF debt platform INR 6000 crore equity infusion in NIIF. NIIF provide funding to different infrastructure projects. By 2025, this will provide infra project financing of INR 1,10,000 crore under national infrastructure pipeline(NIP). NIIF has already invested Rs 10,000 cr, govt will invest Rs 6000 cr as equity and will raise Rs 95,000 debt from market and rest will be raised from private investors.
Subsidy for Fertilizers Due to favorable monsoons throughout the India, fertilizers usage is expected to go up by 17.8%. Rs 65000 cr will be provided to ensure availability of fertilizers to the farmers in upcoming crop season. This will help 140 million(14 crore) farmers.
Enhanced outlay under PMGKRY MGNREGA was provided RS 61,500 cr in 2020-21 budget. Rs 40,000 cr additionally provided under package 1.0. Rs 37,543 cr spent till date on PMGKRY. Additional outlay of RS 10,000 cr will be provided. It can be used for MGNREGA, PMGSY. This will accelerate growth and employment in rural area for migrant workers.
Line of Credit to EXIM bank EXIM bank extends Line Of Credit on behalf of GoI, as assistance to developing countries under IDEAS scheme. It intends to promote India export by mandating recipient countries to import 75% value of the LOC. As on today it UDS 10.50 bn worth projects are being financed under LOC. Govt will release Rs 3,000 cr for promotion of exports through LOC under IDEAS scheme.
Capital and Industrial Stimulus additional budget outlay of Rs 10,200 cr will be provided for capital and industrial expenditure.
R&D grant for COVID vaccine development Rs 900 cr provided for COVID suraksha mission for R&D of Indian COVID vaccine to department of biotechnology. This is purely for R&D purposes. Actual cost and logistic for distribution of vaccine is completely different matter and not covered here and will be provided as required.
These schemes are really great, focus on 26 stressed sector is important. Also social welfare, manufacturing, real estate, infrastructure, agriculture and exports are covered under it. But qualifying condition for some schemes looks weird and can be more open. Like job subsidy scheme only covers the formal sector. There is pick up in the market due to festive season, and next aim of the govt is to sustain this pick up. So, focus should now move to effective implementation of the announcements. Made the required changes in law as early as possible.
Atmanirbhar Bharat does not mean we are moving towards protectionist market. We can't afford that in today's world. We have to sign FTAs with USA, EU and ultimately enter a RCEP. But before we do that we have to make our own industries capable of competing. This is aimed at giving a fresh boost to the potential of the country by strengthening and building infrastructure that represent India using modern solutions in greener way. Bold and speedy reforms are need of the hour. Road is definitely difficult but difficult roads lead to beautiful destination.