Aug 01,2020 | 05 min read

Key Features Of The Economic Package Given By The Modi Government Due To The Pandemic

By Vishesh Dhundia And Aditi Das

Amidst the Covid-19 pandemic, the Hon’ble Prime Minister of India, Mr Narendra Modi gave a huge relief to the people of the country by announcing a massive economic package worth Rs. 20 lakh crores. The package is estimated to be around 10% of the total GDP of India. The PM’s strong will power and his concept of ‘Atma-nirbhar’ are some of the major reasons why India is able to survive this huge crisis and people are able to stay confined to their homes since last four months. His words inspire the nation to a large extent and bring a ray of hope into their lives every time he addresses the nation. Now, he has been successful in introducing a new package for the citizens. Modi Ji in his speech stated, “These reforms include supply chain reforms for agriculture, rational tax system, simple and clear laws, capable human resources and a strong financial system, and will promote business, attract investments and further strengthen ‘Make in India’”. Let’s see what it is all about!

The economic package aims to look into the four major L’s- land, labour, liquidity and laws which will thereby support the key sectors like the cottage industries, micro, small and medium enterprises(MSMEs), while also supporting the different classes of people and accruing benefits for the poor and the migrant workers while increasing the efficiency and ensuring the quality of products that are made in India. Some reform packages related to it are listed here:-

  • Supply chains relating to farming
  • Rational tax system
  • Clear and simple rules and regulations
  • Quality infrastructure
  • Focus on human resources
  • Strong financial system
  • Measures to make India part of the global supply chain

And what these seek to achieve are encourage business, attract investments, expand ‘Make in India’. The chairman of the TVS group, Venu Srinivasan’s stated, “It is a very big amount of money, way beyond our expectations. We are confident that we will end up in a U-shaped recovery and not a slow one.” The CEO of HDFC, Aditya Puri thinks, “Whatever concerns we had raised, in terms of the impact and the problems associated with coronavirus, are being addressed. And Modi ji has also used the crisis to provide his vision for India’s future.”

Modi Ji, in his speech, has mentioned the five pillars of Self-Reliance – the economy, infrastructure, system, demography and demand in order to survive the pandemic and also balance the economy. He said, “Several experts and scientists have said that the virus is going to be a part of our lives for a long time. But it is also important to ensure that our life does not revolve only around it.” The PM has already announced Rs. 1.7 lakh crore for cash and free food by the Finance Ministry and Rs. 5.24lakh crore for liquidity support by the RBI. Now, the balance Rs. 13.1lakh Crore is about 6.5% of the GDP.

Apart from being “Vocal for Local”, the PM assured the package to include:

  • Loan guarantees for MSME units
  • Wage support for MSME workers
  • Support for migrant labourers 
  • Tax incentives to make local production competitive
  • Tax cuts to spur spending 
  • Support for construction and housing

Every crisis is an opportunity, are the words of the PM that keeps us encouraged. He mentioned the need for “Quantum Jump” instead of “Incremental change”. He assured that the technologies used will be of the 21st century and will bring about a huge source of energy for a self- reliant India. Soon after the PM’s speech, the Finance Minister, Nirmala Sitharaman, laid down the distribution of the 20 Crore package dividing it into five tranches. Let’s have a look at them in detail.

Tranche 1: It deals majorly with the MSME which holds 29% of India’s GDP. A total of Rs. 5,94,550 Crore is dedicated to this. The distribution of the total is as follows:

  • Rs 3 Lakhs crores – Collateral- free loans
  • Rs 50000 crores – crore equity infusion 
  • Rs 30000 crores - NBFCs, HFCs
  • Rs 90000 crores - Power distribution companies.

Tranche 2:  It is dedicated to migrant workers and street vendors. A total of Rs 3,10,000 crore have been invested in this and the distribution is as follows:

  • Rs 5000 crore – Support 50 lakh street vendors
  • Rs 2 lakh crore- To farmers through Kisan Credit Cards. 
  • Rs 11000 crore- Food and shelter for migrant workers. 

Tranche 3:  This is dedicated to the agriculture and allied sectors inclusive of dairy, animal husbandry and fisheries. A total of Rs 1,50,000 crore has been invested in this sector and the distribution is as follows:

  • Rs 1 lakh crore – Farm-gate infrastructure, setting up cold chains
  • Rs 20000 crore- To fisherman through Pradhan Mantri Matsya Sampada Yojana
  • Rs 10000 crore- formalize micro food enterprises
  • Rs 4000 crore- Herbal cultivation
  • Rs 15000 crore- Animal Husbandry infrastructure development
  • Rs 500 crore- bee-keeping infrastructure. 

Tranche 4 and 5: The fourth tranche is dedicated to coal, minerals, defence, air-space, airports, MRO, and likewise. The fifth tranche is dedicated to ‘Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)’ for employments with a package of Rs 40000 crore. And, Rs 8100 crore has been dedicated towards viability gap funding.

The year 2020 has seen everything from forest fires, earthquakes, super cyclones, a pandemic and now a major financial loss. It takes a strong government and ministries to hold up to the falling status and power of the government. And it would have not been any way better than how it is being done now by our very own Prime Minister, Mr Narendra Modi Ji. Every lockdown and safety procedure formulated by the government has proved to be fulfilled for the better. The economic state of the country and the people worldwide could not have seen such a drastic fall had it not been the pandemic. Yet, there are people who still have food on their plates amid the crisis while there are others who struggle to get even one meal.  Thus, despite the intense challenge at hand, we have done well as a nation though we still have a long way to go!

Crossing the chasm: Economics and economic policy - Modern Diplomacy

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Vishesh Dhundia

Working at a Boutique Law Firm in Jangpura and deal with matters pertaining to Intellectual Property, Regulatory, Corporate Commercial Disputes, Technology, Media & Entertainment, Communications and Broadcasting, Pharmaceuticals and Healthcare, Biotechnology, Agri-business and Food.