Overview of Government’s INR 6,28,993 Crore Relief Package to Support Indian Economy

Union Minister for Finance Nirmala Sitharaman announced an ‘Economic Relief from Pandemic’  stimulus package worth INR 6,28,993 crore to support the Indian Economy during the fight against COVID-19 pandemic.A total of 17 measures were announced. They can be classified into 3 broad categories –

• Economic Relief from Pandemic,
• Strengthening Public Health &
• Impetus for Growth & Employment.

Economic Relief from Pandemic

8 out of 17 announced schemes  were aimed at providing economic relief to people and businesses affected by COVID-19 pandemic, with special focus on health, reviving travel, and tourism sectors.

INR 1.10 Lakh crore Loan Guarantee Scheme for COVID-19 Affected sectors

Under the Loan Guarantee scheme, additional credit of INR 1.10 lakh crore will flow to the businesses. It includes INR 50,000 crore for the health sector and INR 60,000 crore for other sectors, including tourism.

i.The allocation for the health sector component aims to improve the medical infrastructure in underserved areas. Guarantee cover will be provided for expansion and new projects related to health/medical infrastructure in cities other than 8 metropolitan cities.

Emergency Credit Line Guarantee Scheme (ECLGS)

The Government has increased the Target Credit Line under Emergency Credit Line Guarantee Scheme (ECLGS) by INR 1.5 Lakh crore. With this, the Target Credit Line under the ECLGS scheme has increased from INR 3 Lakh crore to INR 4.5 Lakh crore.

• Under the expanded scheme, the limit of admissible guarantee and loan amount has been proposed to be increased above the existing level of 20% of outstanding on each loan.

Background

ECLGS scheme was launched in May, 2020 as part of Atma Nirbhar Bharat Package to reduce the economic distress faced by MSMEs during the COVID-19 Pandemic.

• Till now, 2.73 lakh crore has been sanctioned and INR 2.10 lakh crore has already been disbursed under the scheme.
• Under the scheme, Member Lending Institutions (MLIs) like Banks, Financial Institutions and Non-Banking Financial Companies (NBFCs) are given Incentives for providing additional funding facilities to MSME borrowers. The Government has set a Corpus of INR 41, 600 Crore for the next 4 FYs from 2020-21 to 2023-24.

New Credit Guarantee Scheme for Micro Finance Institutions

The Credit Guarantee Scheme for Micro Finance Institutions (MFIs) is a new scheme which aims to benefit the smallest of borrowers who are served by the network of Micro Finance Institutions.

• Guarantee cover for funding provided by MLIs to MFIs is till March 2022, or till guarantees for an amount of INR 7,500 crore are issued.
• Credit guarantee will be provided to scheduled commercial banks for loans to new or existing NBFC-MFI or MFIs for on lending up to INR 1.25 lakh to around 25 lakh small borrowers.
• Nirmala Sitharaman announced a guarantee up to 75% of default amount for up to 3 years through National Credit Guarantee Trustee Company (NCGTC).

ii.The interest rate on loans from banks to be capped at MCLR (Marginal Cost of Funds based Lending Rate) plus 2%.

• Maximum loan tenure would be 3 years and 80% of assistance will be used by MFIs for incremental lending.
• Eligibility – All borrowers are eligible, including defaulters up to 89 days.

New Loan Guarantee Scheme for Tourist Guides/stakeholders

Under the new Loan Guarantee Scheme for COVID-19 affected sectors, working capital/personal loans will be provided to people in the tourism sector to discharge liabilities and restart businesses impacted due to COVID-19. The scheme will be administered by the Ministry of Tourism through NCGTC. The amount allocated for the scheme is INR 100 crore.

• Beneficiaries – 10,700 Regional Level Tourist Guides recognised by the Ministry of Tourism and Tourist Guides recognised by the State Governments and about 1,000 Travel and Tourism Stakeholders (TTS) recognized by the Ministry of Tourism.
• Loan Amount – TTS’s can get loans of upto INR 10 Lakh each while tourist guides can avail loan upto INR 1 lakh each.

i.In order to boost the tourism sector, the government has another new scheme. Under the scheme, once Visa issuance is restarted, the first 5 lakh Tourist Visas will be issued visa free of charge to visit India.

The facility will be available only once per tourist and will be applicable till March 31, 2022 or till 5 lakh visas are issued, whichever is earlier.

Extension of Aatma Nirbhar Bharat Rozgar Yojana (ANBRY)

Government has extended the date of registration under the ANBRY scheme from 30.6.2021 to 31.03.2022.

• The scheme was launched 1st October, 2020 to incentivise employers for creation of new employment, restoration of loss of employment through EPFO (Employees Provident Fund Organisation). The subsidy is provided for 2 years.

Additional Subsidy for DAP & P&K fertilizers

Additional subsidy of Rs.14,775 crore will be provided to farmers for Di-Ammonium Phosphate (DAP) and Phosphatic and Potassic (P&K) fertilizers. With this the existing subsidy was Rs.27,500 crores in FY 2020-21 which has been increased to Rs.42,275 crore in FY 2021-22 for NPK-based complex fertilizers.

Free Food Grains under PMGKY from May to November, 2021

The allocation of additional food grains under PM-GKAY 2021 (Phase-IV) has been extended for another 5 months i.e. July to November, 2021. The expenditure of the scheme is expected to be at INR 93,869 crore, with this the total cost of the scheme will reach INR 2,27,841 crore for PMGKY.

• Originally launched in 2020, the Government has spent approximately Rs.133,972 crore under PMGKY 2020.

ii.Strengthening Public Health

A new scheme for strengthening public health infrastructure and human resources has been announced with an outlay of INR 23,220 crore, the amount is to be spent in the current financial year itself (2021-22). Out of INR 23,220 crore, Central’s share will be INR 15,000 crore.

• It will focus on short term emergency preparedness with special emphasis on children and paediatric care/paediatric beds.

iii.Impetus for Growth & Employment

The Government has announced 8 schemes to provide impetus for growth and employment in India.

1.Release of Climate Resilient Special Traits Varieties

The Indian Council of Agricultural Research (ICAR) has developed 21 varieties of rice, peas, millet, maize, soybean, quinoa, buckwheat, winged bean, pigeon pea & sorghum.

• These are biofortified (An idea of breeding crops to increase their nutritional value) crop varieties and have high nutrients like protein, iron, zinc, vitamin-A. They are also tolerant to diseases, insects, pests, drought, salinity, and flooding, early maturing and are also compliant to mechanical harvesting.

2.INR 77.45 crore for Revival of NERAMAC

Government has announced a revival package of INR 77.45 crore for North Eastern Regional Agricultural Marketing Corporation (NERAMAC).

• NERAMAC was established in 1982 to support farmers of the North-East to get remunerative prices for their agri-horticulture products.

3.Additional corpus to NEIA trust

Government has decided to provide an additional corpus to National Export Insurance Account (NEIA) over 5 years, which will enable it to underwrite (give an activity financial support and take responsibility for paying any costs if it fails) additional INR 33,000 crore of project exports.

• NEIA Trust provides cover to buyer’s credit, given by EXIM (Export Import Bank) to less credit-worthy borrowers and supporting project exporters.
• It has supported 211 projects of INR 52,860 crore in 52 countries by 63 different Indian Project Exporters till March 31, 2021.

4.INR 88,000 crore boost to Export Insurance Cover

Government is set to infuse equity in Export Credit Guarantee Corporation (ECGC)  over 5 years to increase export insurance cover by INR 88,000 crore.

• ECGC promotes exports by providing credit insurance services, it supports around 30% of India’s merchandise exports.

5.INR 19,041 crore to implement BharatNet

The Government has set aside INR 19,041 crore for implementation of BharatNet. It will help in expanding the reach of broadband internet to all remaining villages under the BharatNet PPP model.

• The additional allocation takes the total outlay under BharatNet to INR 61,109 crore.

6.Extension of Tenure of PLI Scheme for Large Scale Electronics Manufacturing

The tenure of the Production Linked Incentive (PLI) scheme for large scale electronics manufacturing has been extended by a year till 2025-26. The base year of the scheme 2019-20 remains unchanged.

• Companies have the option to choose their five-year period either from the base year or the year 2020-21 for calculation of the incentives.
• The scheme provides an incentive of 6% to 4% on incremental sales of goods under target segments that are manufactured in India for a period of 5 years.
• Under the PLI scheme, a total of 16 companies have committed a total investment of INR 11,000 crore to manufacture mobile phones worth INR 10.5 lakh crore over the next 5 years.

7.New process for PPP Projects and Asset Monetization

A new policy is set to be formulated for appraisal and approval of PPP proposals and monetization of core infrastructure assets, including through Infrastructure Investment Trust (InvITs).

• The main objective of the revamping of the policy is to ensure speedy clearance of projects to facilitate private sector’s efficiencies in financing construction and management of infrastructure.

8.INR 3.03 lakh crore for Reform-Based Result-Linked Power Distribution Scheme

Government has announced an allocation of INR 3.03 lakh crore for a Revamped Reform-Based Result-Linked power distribution scheme. Out of this, the Centre’s share would be Rs.97,631 crore.

• The scheme is aimed at providing financial assistance to Power Distribution Companies (DISCOMs) for infrastructure creation, up-gradation of system, capacity building and process improvement, the finance minister said during a press conference.

Gist of Important schemes and their allocations

About Ministry of Finance

Union Minister – Nirmala Sitharaman  (Karnataka)
Minister of State (MoS) – Anurag Singh Thakur (Hamirpur, Himachal Pradesh)