The combined package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world after the financial packages announced by the United States, which is 13 per cent of its GDP, and by Japan, which is over 21 per cent of its GDP.
The mega Rs 20 lakh crore stimulus package announced on Tuesday by Prime Minister Narendra Modi includes previously announced measures to save the lockdown-battered economy, and focuses on tax breaks for small businesses as well as incentives for domestic manufacturing. The combined package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world after the financial packages announced by the United States, which is 13 per cent of its GDP, and by Japan, which is over 21 per cent of its GDP.
The Rs 20 lakh crore package includes Rs 1.7 lakh crore package of free foodgrains to poor and cash to poor women and elderly, announced in March, as well as the Reserve Bank’s liquidity measures and interest rate cuts. While the March stimulus was 0.8 per cent of GDP, RBI’s cut in interest rates and liquidity boosting measures totalled to 3.2 per cent of the GDP (about Rs 6.5 lakh crore).
“A special economic package is being announced to make India self-reliant,” Modi said in his third address to the nation over COVID-19 pandemic. “This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10 per cent of India’s GDP.”
Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of coronavirus. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity.
The package, he said, will focus on land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, labourers, middle class, and industries.
The Prime Minister did not share details saying Finance Minister Nirmala Sitharaman will over the next few days spell out details for each sector. But going by the previous figures, it would seem that an additional Rs 12 lakh crore will be pumped into the economy. He, however, dropped hints that the package may include tax relief for small, micro and medium enterprises and incentives to boost domestic manufacturing as well as attracting investments.
Proposals such as giving full tax exemption to companies making new investment of a minimum threshold in sectors such as medical devices, electronics, telecom equipment and capital goods was said to be under consideration of the government. Investments in infrastructure are may also form part of the package.
Easy access to land as well as labour reforms may also form part of the package to lure companies leaving China.
The package is seen as a government attempt to check the world’s fifth-largest economy hurtling towards its first full-year contraction in four decades. According to estimates, lockdown may have led to 12.2 crore people losing jobs in April and consumer demand evaporating. He said that a self-reliant India will stand on five pillars viz economy, which brings in quantum jump and not incremental change; infrastructure, which should become the identity of India; technology-driven system; vibrant demography; and demand.
As part of the Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Package (PMGKP), the government announced free wheat or rice plus pulses to poor as well as a cash payment to women and poor senior citizens and farmers over a period of three months till June.
According to the latest government data, Rs 34,800 crore financial assistance using digital payment infrastructure were provided to about 39 crore beneficiaries. Under the Pradhan Mantri Garib Kalyan Ann Yojana 67.65 lakh MT of foodgrains have been lifted by 36 states/UTs for April 2020. Around 16 LMT of foodgrains have been distributed, covering 60.33 crore beneficiaries by 36 states/UTs for April 2020.
About 6 LMT of foodgrains have been distributed, covering 12.39 crore beneficiaries by 22 states/UTs for May 2020. 2.42 LMT of pulses have also been dispatched to various states/UTs. Pulses have been distributed so far to 5.21 crore household beneficiaries out of 19.4 crore such beneficiaries.