On May 12, 2020, Prime Minister Modi, in his fifth address to the nation since the great lockdown announced ‘Aatma Nirbhar Bharat Abhiyan‘ package of Rs. 20 lakh crore to revive the Indian economy, to help farmers, migrant workers, etc. and to revive the industrial sector. This package is 10% of India’s total GDP. The details about the package were announced by the Finance Minister Nirmala Sitharaman.The package included Rs 8 lakh crore in liquidity measures announced by the RBI. The government will also provide a 100% guarantee to Rs 3 lakh crore in small business loans.
Some major announcements have been listed below:
Rs 3 lakh crore Collateral free Automatic Loans have been announced for businesses including MSMEs. Some welfare measures include:
1.Rs 50,000 crore equity infusion through MSME Fund of Funds
2.Reduction of EPF contribution for businesses and workers for 3 months
3.Extension of due date of all income tax returns for FY 2019-20 till Nov 30, 2020
4.Rs 45,000 crore Partial Credit Guarantee Scheme 2.0
Poor including farmers and migrant workers
1.Free supply of food grains to migrants for 2 months
2.Affordable Rental Housing Complexes for migrants/urban poor
3.Rs 5000 crore Special Credit Facility for street vendors
4.Rs 30,000 crore Additional Emergency Working Capital Funding for farmers through NABARD
5.Rs 2 lakh crore Concessional Credit Boost to 2.5 crore farmers through Kisan Credit Cards
Agriculture, Animal Husbandry, Fisheries
1.Rs 1 lakh crore Agri Infrastructure Fund for farm gate infrastructure for farmers
2.Rs 20,000 crore for fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY)
3.Rs 15,000 crore for Animal Husbandry Infrastructure Development Fund
4.Rs 500 crore for beekeeping initiatives
5.Amendments to Essential Commodities Act to enable better price realisation for farmers
6.Agriculture Marketing Reforms to provide marketing choices to farmers
7.Agriculture produce price and quality assurance
New Horizons of Growth
1. Policy reforms to fast track investment to pave way towards Aatma Nirbhar Bharat
2. Policy reforms in coal sector, mineral sector, defense production
3. Private participation in space activities
4. More world class airports through PPP
Government Reforms and Enablers
1. Rs 40,000 crore increase in allocation for MGNREGA to boost employment
2. Health reforms and initiatives to increase investment in public health and to prepare the nation for future pandemics
3. Technology driven education with equity post COVID
4. Enhancement of Ease of Doing Business through IBC related measures
5. Public Sector Enterprise Policy for a Self Reliant India
DOES IT ADDRESS BOTH SUPPLY AND DEMAND SIDE OF THE ECONOMY :
The ATMA NIRBHAR BHARAT ABHIYAN has mainly two aims namely :
1.Liquidity infusion and direct money transfer for the poor to work as shock absorbers for those in acute stress.
2.Long term reforms in growth critical sectors to make them globally competitive and attractive .
Having read the major announcements under this abhiyan , we can observe that most of the initiatives and investments are made to increase the supply of goods and services at primary , secondary and tertiary sectors through reforms to amend ECA, APMC, Contract framing, etc… ; infusions in MGNREGA ; the Rs 3 lakh crore collateral-free loan facility for MSMEs under the package [ helps finance-starved sector and thereby provide a kickstart to the dismal state of the economy] ; newly launched PM e-Vidya programme for multi-mode access to digital online education etc…but scarcely addresses the demand side of the economy.
The lockdown has lowered aggregate demand, and a fiscal stimulus is needed. However, the package, by relying overwhelmingly on credit infusion to boost the economy, has failed to recognise that investment will pick up only when people across income segments have money to spend.Under the present crisis situation many government employees of different cadres had a salary cut and many private employees are facing seasonal unemployment which is showing a declining effect on the demand curve of the economy.
Other challenges a part from lack of demand are as follows:
Issues Related to Liquidity: The package of Rs 20 lakh crore comprises both fiscal and monetary measures, the latter being in the nature of credit guarantees and liquidity infusions into banks and other financial sector institutions rather than the economy per se.
#Majority of the package is liquidity measures that are supposed to be transmitted by RBI to Banks and Banks to Citizens. This transmission wouldn’t be as smooth owing to inefficient transmission of monetary policy.
Lack of Backward and Forward Linkages: Unless the rest of the domestic economy is revived, the MSME sector may face a shortage of demand, and its production may soon sputter to a close.
Burgeoning Fiscal Deficit: Government claims that the stimulus package is around 10% of India’s GDP. However, financing it would be difficult as the government is worried about containing the fiscal deficit.
Difficulty in Mobilising Finances: The government seeks a disinvestment to mobilise the finances for the plan.
#However, the majority of Indian industries are already a bit debt-laden to take up the stake in PSUs.
#Further, it is difficult to borrow the foreign markets, as rupee with respect to dollar is all time low.
Steps To Be Take
Enhancing Demand: The economic package for the country emerging out of the lockdown requires a stimulus enhancing demand across the economy.
1.The best way for this is to spend on greenfiled infrastructure.
2.Infrastructure spending uniquely creates structures that raise productivity and extends spending power to the section of the population most affected by the lockdown, namely daily wage labourers.
Mobilising Finances: For financing of the stimulus package, India’s foreign reserves stand at an all-time high which could be strategically used to finance its needs.
1.The rest may have to come from privatisation, taxation, loans and more international aid.
Holistic Reforms: Any stimulus package will fail to reflect the trickle-down effect, until and unless it is backed by reforms in various sectors.
Thus, Atma nirbhar plan also encompasses the unfinished agenda of holistic reforms which may include reforms in Civil services, Education,Skill and Labour, etc.
Any scheme to come in future should mainly focus on increasing the per-capita income and Disposable income of the citizens as supply without demand disturbs the economic cycle and may lead economy into recession situation. The post-Covid-19 era may usher in unprecedented opportunities provided the implementation deficit is adequately addressed.