In response to the biggest economic crisis since 1979 triggered by the Covid-19 pandemic and the subsequent 54-day lockdown – one of the harshest in the world, the Central government’s fiscal relief so far is limited to just about 1.1% of GDP. It has, however, allowed states to increase their borrowing limit unconditionally by 0.5% of their Gross State Domestic Product (GSDP) or Rs 1.07 lakh crore.
A chunk of the Centre’s fiscal relief – Rs 40,000 crore or 0.2 per cent of GDP – has come as additional allocation to MGNREGA over and above the Budget Estimate of Rs 61,500 crore in the fifth and final tranche of the Atmanirbhar package announced by Finance Minister Nirmala Sitharaman on Sunday.
Much of the May 12 Atmanirbhar package of Prime Minister Narendra Modi totaling Rs 20 lakh crore and elaborated over the last five days by Sitharaman has been liquidity driven, with little burden on the exchequer. The government also took this opportunity to re-package some of the old measures, and push some new reforms such as in agriculture, public sector enterprises, which has been pending for long.
|Centre’s Fiscal Cost||
Amount in crore (Rupees)
|Tranche 1, FM Package||25,500|
*includes PM Garib Kalyan Yojana, Rs 15,000 crore towards anti-Covid health and Rs 7,800 crore loss of revenue
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The money that the poor got in their hands over the last two months following the Central government announcements has been just Rs 33,176 crore so far, Finance Minister Sitharaman said. This includes Rs 10,025 crore to women Jan Dhan account holders, Rs 16,394 crore to farmers under PM Kisan Yojana (frontloading of payment without additional fiscal cost), Rs 2,807 crore to old persons, widows and the disabled, and Rs 3,950 crore to construction workers (also without any fiscal outgo since it is paid from the Building and Construction Workers’ Cess Welfare Fund).
To a question on why did the government not consider putting more money – Rs 5,000 to Rs 7,000 as recommended even by Noble laureates – in the hands of the people, Sitharaman said, “There are many ways to address the problem… What we did will have a greater impact.”
The Centre has also finally agreed to a continuous demand from states to increase their borrowing limit. Finance Minister Sitharaman said the borrowing limit has been increased to 5 per cent of GSDP from 3 per cent of GSDP, but states can borrow only 0.5 per cent of it unconditionally. The Centre has linked 1 per cent – to be released in tranches of 0.25 per cent each – to reforms in urban local body revenues, one-nation one ration card, power distribution and ease of doing business. The balance 0.5 per cent would be released once states implement at least three of the four milestones.
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Breakdown of the Rs 20 lakh crore package under the Atmanirbhar Bharat Abhiyan
March 26, 2020: FM Nirmala Sitharaman announces the Pradhan Mantri Garib Kalyan Yojana
Size of the package: Rs 1.7 lakh crore or 0.85% of GDP
Of which the following three components do not put any ‘additional’ burden on the Government of India Budget:
*Front-loading of PM Kisan funds: Rs 17,380 crore
*Building and Other Construction Workers Welfare Cess Fund: Rs 31,000 crore
*District Mineral Foundation Funds: Rs 35,925 crore
Additional fiscal cost to the Central Govt: Rs 85,695 crore (0.43% of GDP)
March 27, 2020: Liquidity injection by Reserve Bank of India
Size of the package: Rs 3.74 lakh crore (1.8% of GDP)
*Targeted Long-Term Repo Operations (TLTRO): Rs 1,00,000 crore
*Cash Reserve Ratio (CRR) cut of 100 basis points to 3% of net demand and time liabilities: Rs 1,37,000 crore
*Accommodation under Marginal Standing Facility hiked from 2% of Statutory Liquidity Ration to 3%: Rs 1,37,000 crore
Fiscal cost to the Central Govt: 0
April 17, 2020: Liquidity injection by Reserve Bank of India
Size of the package: 0.5% of GDP
*Targeted Long-Term Repo Operations 2.0: Rs 50,000 crore
*Refinance of Sidbi, Nabard and NHB: Rs 50,000 crore
Fiscal cost to Central Govt: 0
April 27, 2020: Special Liquidity Facility for Mutual Funds: Rs 50,000 crore
Size of the package: 0.25% of GDP
Fiscal cost to Central Govt: 0
Before PM’s AtmaNirbhar package announcement
Rs 7,800 crore revenue loss
Rs 15,000 crore for anti-Covid health facilities
May 12, 2020
Prime Minister Narendra Modi announces Rs 20 lakh crore AtmaNirbhar package, says the size of the economic package is 10% of GDP, and includes earlier announcements made by the RBI and the Finance Minister.
May 13, 2020: Finance Minister Nirmala Sitharaman presents Tranche 1 of Atmanirbhar package.
Size of the package: Rs 5.94 lakh crore (2.97% of GDP)
*Collateral free automatic loans to MSMEs, Govt to give 100% credit guarantee cover to banks and NBFCs on principal and interest: Rs 3 lakh crore
*Subordinate Debt to provide equity support to stressed MSMEs, of which govt support to CGTMSE limited to Rs 4,000 crore: Rs 20,000 crore
*Equity infusion for MSMEs through Fund of Funds, Mother Fund and few Daughter Funds to operate it, govt contribution likely to be Rs 10,000 crore to FoF: Rs 50,000 crore
*EPF support for business and workers for 3 months: Rs 2,500 crore
*EPF contribution reduced for business and workers for 3 months: Rs 6,750 crore
*Special liquidity scheme for NBFCs/ HFCs/ MFIs, securities issued by them fully guaranteed by govt: Rs 30,000 crore
*Partial Credit Guarantee Scheme 2.0 for NBFCs, first 20% loss borne by govt: Rs 45,000 crore
*Liquidity injection by REC and PFC for Power Distribution Companies (Discoms): Rs 90,000 crore
*25% reduction in TDS/ TCS rate: Rs 50,000 crore
Additional Fiscal Cost to the Central Govt: Rs 25,500 crore (0.13% of GDP)
May 14, 2020: Finance Minister Nirmala Sitharaman announces Tranche 2 of the Atmanirbhar package.
Size of the package: Rs 3.10 lakh crore (1.55% of GDP)
*Free food grain supply to migrants for two months: Rs 3,500 crore
*Interest subvention of 2% for prompt-payees of Mudra-Shishu loans: Rs 1,500 crore
*Special liquidity scheme to provide Rs 10,000 working capital to 50 lakh street vendors: Rs 5,000 crore
*Credit-linked subsidy scheme for middle income families (Rs 6-18 lakh a year), with expectations it will lead to Rs 70,000 crore investment in housing industry
*CAMPA funds to be used by states for afforestation and plantation works: Rs 6,000 crore
*Additional emergency working capital funding for farmers through Nabard: Rs 30,000 crore
*Concessional credit to 2.5 crore farmers through Kisan Credit Cards: Rs 2 lakh crore
Fiscal Cost to the Central Govt: Rs 5,000 crore (0.025% of GDP)
May 15, 2020: Finance Minister Nirmala Sitharaman announces Tranche 3 of Atmanirbhar package:
Size of the package: Rs 1.5 lakh crore (0.75% of GDP)
*Financing facility for agri infrastructure projects: Rs 1,00,000 crore
*Scheme for formalisation of Micro Food Enterprises: Rs 10,000 crore
*Funding for fishermen through PM Matsya Sampada Yojana: Rs 20,000 crore
*Animal Husbandry Infrastructure Development Fund to be set up: Rs 15,000 crore
*Promotion of Herbal Cultivation: Rs 4,000 crore
*Beekeeping initiatives: Rs 500 crore
*Operation Green to be extended to all vegetables: Rs 500 crore
Policy reforms: Essential Commodities Act to be amended, agriculture marketing to be freed up
Fiscal Cost to the Central Govt: Rs 30,000 crore (0.15% of GDP)
May 16, 2020: Finance Minister Nirmala Sitharaman announces Tranche 4 of Atmanirbhar package.
Size of the package: Rs 8,100 crore (0.04% of GDP)
Fiscal Cost to the Central Govt: Rs 8,100 crore Viability Gap Funding (0.04% of GDP)
May 17, 2020: Finance Minister Nirmala Sitharaman announces Tranche 5 of Atmanirbhar package.
*New policy for public sector enterprises, strategic sectors to be notified in which there will be at least one, but not more than four, PSEs in addition to private players.
*Limit of state borrowings increased to 5% of GSDP from 3% of GSDP; but only 0.5% of it (Rs 1.07 lakh crore) can be raised conditionally
*MGNREGA gets an additional Rs 40,000 crore
Fiscal cost to the Centre: Rs 40,000 crore (0.2% of GDP)
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