FM announces Rs 2.65 trn stimulus under Aatmanirbhar Bharat 3.0 to boost growth
Emergency Credit Line Guarantee Scheme for MSMEs, businesses, MUDRA borrowers and individuals extended till March 31, 2021 and additional credit up to 20%. Provides Rs 30 billion to boost project exports and Rs 102 billion additional budget stimulus for capital and industrial expenditure.
After launching Aatmanirbhar Bharat Abhiyaan
1.0 (May 12, 2020) and 2.0 (October 12, 2020), Finance Minister Nirmala Sitharaman
yesterday announced Rs 2.65 trillion crore stimulus package under Aatmanirbhar Bharat 3.0 as part of Government of India’s plan to give a boost to economic activity. “The total stimulus announced by the Government and Reserve Bank of India till date, to help the nation tide over the COVID-19 pandemic, works out to Rs 29.87 trillion, which is 15 per cent of national GDP. Out of this, stimulus worth 9 per cent of GDP has been provided by the government,” said Nirmala Sitharaman while addressing the press conference.
FM made 12 key announcements under AatmaNirbhar Bharat 3.0.
Emergency Credit Line Guarantee Scheme (ECLGS)
for MSMEs, businesses, MUDRA borrowers and individuals (loans for business purposes), has been extended till March 31, 2021. A credit guarantee support scheme ECLGS 2.0 was launched for healthcare sector and 26 stressed sectors (identified by Kamath Committee) with credit outstanding of above Rs 500 million and up to Rs 5 billion as on February 29, 2020 stressed due to COVID-19, among other criteria. Entities will get additional credit up to 20 per cent of outstanding credit with a tenor of five years, including 1-year moratorium on principal repayment. This scheme will be available till March 31, 2021. Till November 12, 2020, Rs 2.05 trillion sanctioned has been sanctioned under the ECLG scheme to 61 lakh borrowers, with Rs 1.52 trillion disbursal. “ECLGS 2.0 to provide much needed relief to stressed sectors by helping entities sustain employment and meet liabilities. It will also benefit MSME sector
which provides goods and services to eligible entities,” said FM during the press conference.
FM announced that 10 more Champion Sectors will be covered under the Production Linked Incentives (PLI) Scheme to help boost competitiveness of domestic manufacturing. The Union Cabinet on Wednesday gave its nod for extending production linked incentive worth Rs 1.46 trillion to 10 new sectors
. “This will give a big boost to economy, investment, exports and job creation. A total amount of nearly Rs 1.5 trillion has been earmarked across sectors, for next five years,” said Nirmala Sitharaman. The ten sectors are - advance cell chemistry battery, electronic/technology products, automobiles & auto components, pharmaceuticals drugs, telecom & networking products, textile products, food products, high efficiency solar PV modules, white goods (ACs & LED), and specialty steel. PLI scheme is aimed at boosting domestic manufacturing, attracting large investments and establishing India at the global level in the priority sectors. PLI Scheme
was first launched in April 2020 for mobile manufacturing & electronic components, critical raw materials (drug intermediaries) and active pharmaceutical ingredients (API), and medical devices.
AatmaNirbhar Bharat 3.0 provides Rs 30 billion boost to EXIM Bank for promoting project exports under Indian Development and Economic Assistance Scheme (IDEAS Scheme). This will help EXIM Bank facilitate Lines of Credit development assistance activities and promote exports from India. Exim Bank extends Lines of Credit (LoC) on behalf of the Government of India, as assistance to developing countries under IDEAS scheme. It promotes Indian export by mandating recipient countries to import 75 per cent value of the LoC. Projects supported under this scheme are railways, power, transmission, road and transport, auto and auto components, sugar projects, etc. As on date, 811 export contracts, aggregating $ 10.50 billion are being financed under LoCs.
FM Nirmala Sitharaman announced Rs 102 billion additional budget stimulus for capital and industrial expenditure on domestic defence equipment, industrial infrastructure and green energy.
A new scheme - AatmaNirbhar Bharat Rozgar Yojana - to incentivise job creation during COVID-19 recovery has been launched. If EPFO-registered establishments take in new employees without EPFO registration or those who lost jobs earlier, the Yojana will benefit these employees. The scheme will be effective from October 1, 2020 and operational till June 30, 2021. Certain other eligibility criteria would have to be met, and Central Government will provide subsidy for two years in respect of new eligible employees.
A sum of Rs 180 billion is being provided for PM Awaas Yojana - Urban over and above Rs 80 billion already allocated this year. This will help ground 12 lakh houses and complete 18 lakh houses, create additional 78 lakh jobs and improve production and sale of steel and cement, resulting in multiplier effect on economy.
To boost construction and infrastructure, under Aatmanirbhar Bharat 3.0, performance security on contracts has been reduced from 5-10 per cent to 3 per cent to provide ease of doing business and relief to contractors whose money otherwise remains locked up. It will also extend to ongoing contracts and Public Sector Enterprises. Earnest Deposit Money (EMD) for tenders will be replaced by Bid Security Declaration. The relaxations in the General Financial Rules will be in force till December 31, 2021.
Aatmanirbhar Bharat 3.0 offers income tax relief for developers & home buyers. Differential between circle rate and agreement value in real estate income tax under Section 43 CA of IT Act has been increased from 10 per cent to 20 per cent. This is for primary sale of residential units up to Rs 20 million (from date of announcement of this scheme, till June 30, 2021). Consequential relief up to 20 per cent will also be allowed to buyers of these units under section 56(2)(x) of IT Act for the said period. The Income Tax relief provides incentive to middle class to buy homes.
Government will make Rs 60 billion equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF provide a debt of Rs 1.1 trillion for infrastructure projects by 2025.
As fertiliser consumption is going up significantly, Aatmanirbhar Bharat 3.0 provides Rs 650 billion subsidy to ensure increased supply of fertilisers to farmers to enable timely availability of fertilisers in the upcoming crop season.
Under the Prime Minister Garib Kalyan Rozgar Yojana (PMGKRY), currently in progress in 116 districts, Rs 375.43 billion has been spent till date. FM has now announced additional outlay of Rs 100 billion for PM Garib Kalyan Rozgar Yojana to provide rural employment and help accelerate rural economy.
Aatmanirbhar Bharat 3.0 will provide Rs 9 billion to Department of Biotechnology for Research and Development of Indian COVID vaccine.