So, what is this “Aatmanirbhar Bharat” package? Also knows as the Economic stimulus package. To understand the package in total. We need to know, why the package is even needed?
Stimulus package is basically a government's weapon to fight a struggling economy or recession. A recession is actually a specific sort of vicious cycle, with cascading declines in production of good and services leading to unemployment which decreases the household income and due to lesser money in the market it leads to drop in sales that feeds back into a further drop in output, spreading rapidly from industry to industry and region to region. And this is where government comes into play with their weapon of economic stimulus package to fight the recession cycle. But please don’t think that money in this package is just given as cash to the industries or people. A stimulus package is a combination of Monetary policy and Fiscal Policy. Monetary policy is where Reserve Bank of India influences the country's money supply and the overall economy by using various tools. In simple terms, banks make it easy to get loans by lowering the interest rate thus helping the citizens with easy access to credit which then can be used by individuals for their personal use or businesses for their expansion. Now Fiscal policy refers to governments revenue which is tax money. Fiscal policy is where country’s government influence economic conditions with use of government spending or by regulating tax policies. Governments use these tools to invest in sections of the country hard-hit by the recession or by giving some tax concessions to people or business, both of which comes under fiscal measures.
Total value sums up to 20,97,053. You can see that big chunk of the package is coming from RBI measure, which are basically monetary and credit related measure.
Now, let’s see the monetary and fiscal measures in other sections.
In earlier measures, govt announced tax concession & spending in health care sector which includes expenditures on testing kits, medical equipment’s, and insurances for front-line workers.
Then through PM garib kalyan package, basically a relief package, money was transferred into accounts of farmers and workers, in all, people in lower income group. It also included giving free food, gas cylinders, and transportation cost of migrant to their hometown. Total cost of package came around 2 lakh cr rs
Package on the first day announced the availability of loan for MSME sector which are Micro, small and medium enterprises. This package also includes Employee Provident Fund Support, where govt is covering up for people with less than 15,000 per month of income. Also, govt has reduced the EPF rates in private sectors from 12% to 10%. Package also provides liquidity facility & partial credit guarantee to Nonbank financial companies (NBFC) like Bajaj Finance, Mahindra finance, Tata capital etc, then to (HFC) Housing finance companies & Micro Finance institutions, so that theses companies can provide money as loan to other business. Then there are DISCOMS which are power distribution companies, who are unable to collect their receivables because people are unable to pay them, therefore govt have asked power finance companies to sanction loans so DISCOMs can at least pay to power generation companies. Then there is also reduction in TDS and TCS percentages. So, as we can see the total amount of this package comes to 5.9 lakh cr rs which comprises mostly of monetary measures. There are no direct benefits we will be receiving.
On day 2 the second part of the package was announced targeting poor, migrants and farmers.
On day 3 the third part of the package was announced targeting the agriculture sector.
Now, let’s look at the day 4&5 packages. Here, the viability gap funding for health care related infra is being made available. Then the additional money of 40,000 cr is made available under MGNREGA which will help the migrant workers to get job in their hometown. Total of this package comes (48,100) around 48000 cr. This package unlike other packages should be considered as fiscal measure as the money is directly being invested by the govt. Also under this package, state will be allowed to borrow more money as they hit the milestones laid out by the central govt.
The positives from this package is definitely that govt is being sensitive toward lower income group and they’re directly spending money in terms of free food grains, free transportation and other supplies. Also, govt is giving lot liquidity to the MSME sector which are small business by proving partial guarantee on some of the loans.
Cons of this package is, govt has not laid out clear action plan for Covid-19 containment which is causing panic in the stock market and could be the reason of its recent downfall. Second thing is, this package has a very complex structure and things are not clearly defined.
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