February 24, 2024


Delighting finance buffs

What to expect from govt’s coronavirus stimulus package 2.0

Prime Minister Narendra Modi on Tuesday announced a Rs 20 lakh crore relief package to support the economy in the wake of economic devastation caused by the coronavirus pandemic.

Details about the relief package, which is a mix of fiscal and monetary measures, will be given by Finance Minister Nirmala Sitharaman later in the day.

A part of the Rs 20 lakh crore relief package, under the Atmannibhar Bharat Abhiyan, includes previous measures that were announced by the government earlier.

It includes measures already undertaken by the Reserve Bank of India to boost liquidity worth approximately Rs 6.5 lakh crore and the Rs 1.7 lakh crore package announced earlier for the marginalised section.

The fresh relief package could include a mix of reforms in tax, labour and land laws besides providing liquidity relief to a large number of small businesses across sectors affected by the nationwide lockdown.

Land, labour, liquidity

Modi said the relief package will broadly focus on land, labour, liquidity and laws.

Experts have often highlighted the importance of providing liquidity to jumpstart economy and subsequently focus on reforming land and labour laws for long-term growth.

Land acquisition and labour laws are issues faced by each sector in India and several industry honchos have openly expressed the need to ease such parameters as it will further improve ease of doing business in India.

Better labour laws will help generate fixed employment while easing land acquisition rules will see faster scaling of many projects that get stuck in bureaucratic red tape.

Liquidity is probably the need of the hour, considering that companies across sectors have limited or no cash reserves to support operations or even pay employees.

It is required abundantly to support the supply and demand cycle, which has been crippled by the Covid-19 pandemic.

Farmers, small industries, MSMEs

The prime minister in his speech said that the fresh liquidity package will primarily cater to India’s small industries including cottage industries, home industry, small-scale industries, MSMEs, which support the livelihoods of crores in India.

For MSMEs and other small industries, the government may announce a massive overhaul in the structure of levies collected apart from credit guarantee scheme, which will enable banks to provide more working capital to MSMEs.

Several reports indicated that the government relief package will include a credit guarantee scheme for small businesses and may cost up to Rs 3 lakh crore.

The relief package will also bring considerable relief to farmers, said Modi, indicating that there could sweeping changes in laws that government farming and agriculture.

There could also be announcements about direct cash transfers or waivers for farmers and agricultural workers.

Honest taxpayers

During the address on Tuesday, PM Modi also hinted at some relief for “middle class” taxpayers, which more or less includes the working class and is a bulk of India’s population.

“This economic package is for the middle class of our country, which pays taxes honestly and contributes to the development of the country,” he said.

This indicates that government may ease burden or even reward honest taxpayers. Providing relief to a fraction of taxpayers can help not only in better cash flow to marginalised sections but also in fixing the demand-supply cycle, which has been crippled by the lockdown.

These are some of the broad areas the massive stimulus package will cover. More details will emerge after Sitharaman’s announcement later in the day.

Read | PM Modi speech: Lockdown 4.0 to Rs 20 lakh crore economic package for land, labour and liquidity | Key takeaways

Read | India records 3,604 new coronavirus cases in 24 hours, total count tops 70,000

Watch | From call for self-reliance to Rs 20 lakh crore package, watch PM Modi’s full speech

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