What to expect from Nirmala Sitharaman's presser on Rs 20 lakh crore financial package
New Delhi, May 13: In a big push to economy, Prime Minister Narendra Modi has announced a Rs 20 lakh crore relief package to support the economy hit by the coronavirus pandemic.
The prime minister noted that 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% of India's GDP. He said that the package will provide a much needed boost towards achieving 'Atmanirbhar Bharat'.
PM Modi observed that the package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others. However, the prime minister did not divulge complete details of the package.
He informed that the details of the contours of the package will be provided by the Finance Minister Nirmala Sitharaman during a press meet expected to be held at 4 pm today.
While industry bodies like CII and FICCI have praised the move, saying it will go a long way in making India self-reliant, the opposition has termed the announcement of a Rs 20 lakh crore package is like a headline and blank page.
Senior Congress leader Chidambaram called the Centre's Rs 20 lakh crore stimulus package as a "headline and a blank page", and said he was looking forward to Finance Minister Nirmala Sitharaman filling the bank page.
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).
Land, labour, liquidity
The package will focus on land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, labourers, middle class, and industries.
Easy access to land as well as labour reforms may also form part of the package to lure companies leaving China.
Farmers, small industries, MSMEs
The government is expected to announce a massive relief package that includes a credit guarantee scheme for small businesses and may cost up to Rs 3 lakh crore.
Key drivers of job creation and economic growth, MSMEs have been the worst hit by the nationwide lockdown that brought economic activity to a halt. This sector accounts for about 45% of manufacturing output, more than 40% of exports, over 28% of gross domestic product (GDP).
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.
The relief package is also expected to provide considerable relief to farmers as there could sweeping changes in laws that government farming and agriculture.
Major nnouncements about direct cash transfers or waivers for farmers and agricultural workers is also expected.
In the televisionised address, PM Modi also indicated at some relief for "middle class" taxpayers, which more or less includes the working class and is a bulk of India's population.
"This economic package is for the middle class of our country, which pays taxes honestly and contributes to the development of the country," he said.
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.