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Five Power Points From FM Announcements

by Tavaga Invest

Source: Tavaga Research

In the last five days FM Nirmala Sitharaman came up with the fiscal package, the total stimulus of Rs 20 lakh crore or 10% of the GDP covers various sectors with various reforms. 

Some parts of the package aim to provide reforms for the medium to long term time frame, whereas some parts of the package are aimed directly at the sectors which have been affected by the pandemic providing them with immediate benefit. 

How this stimulus package affects the consumers’ spending and income is yet to be seen, but the overall package is comprehensive enough to provide the required push to the economy.  

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Here is the list of five announcements which we liked the most- 

1. Providing additional job push through increased allocation for MGNREGS

• FM announced that the government will now allocate additional 40,000 crores in MGNREGS to provide rural employment. 

• This step will help in generating around 300 crore person-days of employment in total.  

• FM addressed the need for work for returning migrant labours 

• More emphasis will be given on creating livelihood assets to boost the rural economy.  

The scheme was launched in 2005 with a simple objective of providing unskilled manual labour to any rural adult who demands it, The scheme aimed to provide 100 days of manual work to rural adult no questions asked and if the government is not able to provide the work to such person, then he/she is entitled to unemployment benefits. 

This scheme was actually very beneficial for seasonal workers who earlier used to stay unemployed during off-seasons.

As a result of this, the rural income increased and thus the consumer demand started going upwards and since around 67% of our GDP is driven by consumer demand, this step resulted in some good upticks in GDP numbers. 

In the current scenarios where there is need for a significant increase in consumer demand to pump the economy, this is a welcome step. 

2. Pradhan Mantri Garib Kalyan Package (PMGKP)

To fight the ongoing pandemic the government under the PMKGP has provided financial assistance of more than Rs 31,235 crore till date to more than 33 crore beneficiaries. 

Direct benefit transfer of Rs 2000 per person is being provided to 8.19 crore farmers under the PM Kisan scheme.

20 crore women Jan Dhan account holders will receive Rs 500 per month for three months, the payment for the first month of this has already been done. 

These are some of the many support provided by the government under the 1.7 lakh crore relief package named as Pradhan Mantri Garib Kalyan Package (PMGKP)

3. Steps taken for small businesses including MSMEs

The FM under the first tranche for the fiscal stimulus announced that collateral-free loan to the tune of Rs 3 lakh crore will be provided to MSMEs, as the finance ministry this move will help the 45 lakh MSME units to start work and save jobs.

For those MSMEs who are struggling to make their ends meet, a subordinate debt provision of Rs 20,000 crore will be made available, This will benefit around 2 lakh stressed MSMEs

Beside this FM also announced that the government will create a fund of fund(FoF) and take an equity stake in those MSMEs who are in dire need of capital, there will be a Rs 50,000 crore equity infusion in viable MSMEs that need handholding.  

4. Steps to boost infrastructure

FM under the third tranche of the fiscal stimulus announced that for upgrading infrastructure Rs 1 lakh crore will be allocated to strengthen farm gate infrastructure such as post-harvest storage facilities, cold chains etc. 

Under the fourth tranche of fiscal stimulus, the FM announced the stimulus package of Rs 62,400 crore with various reforms under the Coal evacuation infrastructure, Civil Aviation: Spending on Maintenance Repair and Operation (MRO), Viability gap funding for social infrastructure, Down-payment to Airport Authority of India

Although these reforms will not provide immediate relief, they have to be seen with a medium to long term focus. 

5. Privatization of non-strategic PSUs 

In the fifth and the final tranche for the fiscal stimulus, the FM said that there will be a maximum of four public sector companies in the government strategic sectors, and state-owned companies will eventually be privatised. 

The government will announce a new coherent public sector enterprise policy. The government will announce a list of strategic sectors, only a maximum of 4 Public sector enterprises will be allowed under these sectors, rest will be either privatised, merged, or brought under a holding company. 

A budget of  Rs 2.10 lakh crore is expected from the disinvestments in the current fiscal year, out of this Rs 1.20 lakh crore is expected from CPSE companies. 

Here is the list of the complete breakup of Rs 20 lakh crore relief package 

Breakup of Rs 20 lakh crore relif package
Source: Tavaga Research

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