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Atmanirbhar Package Beneficial or not?

Panic has been the usual mindset of the world for the past few months. In the beginning, everyone took the coronavirus lightly and insignificantly. When the government had told the citizens of their respective countries to follow social distancing, people did not even bother to have a look at the advice. If they had, this world would have been living in a completely different world and time. This is one of the recent times where the world has united to defend itself against an attack. The Indian economy has seen a lot of detrimental changes during this period. To make the things worse, they had to impose a complete lockdown from March 24th to May 31st. In order to tackle this crisis, the Prime Minister of India, Narendra Modi, along with the Finance Minister, Nirmala Sitharaman, launched a package to withstand the problem of the falling economy.

On the 14th of May 2020, the government announced a package of Rs. 20 lakh crores to aid the MSME’s (Micro, Small and Medium Enterprises). This package is also called Atmanirbhar Package. So for easier reference and thinking, I would like to break up the package into two sectors—Government to Business and Government to People. All of these would pave the way for the restructuring of the Indian economy.


Government to Business

Employer Provident Fund (EPF) contribution paid by the Government for companies having a maximum of 100 employees will be 2500 Crores. Out of which, 90% will be used to give Rs. 15000 per month as their salaries. This will benefit the employees as well as the employers. Employees will get their salaries, but not what they usually get. In this scheme, they do not need to pay EPF. For the employers, it is a huge advantage as the government pays a part of their labour costs. Government will spend 18000 crores from the tax revenue they received from income tax. The benefit of this spending is that it does not incur any extra cost to the government. They are also spending on a new parameter. They have decided that they are going to lend Automatic Collateral Free loans to businesses. This means that businesses will be able to invest easily as they can buy loans without keeping one of their assets as collateral. This will in turn boost the economy. This was done with a hope of the economy coming back to its groove. The government is willing to set Rs. 3, 00, 000 crores collateral free loans. Here, there is no or minimum cost to the government. Under the subordinated debt for stressed MSMEs of 20,000 crores, promoters of these enterprises will be given the debt by the banks. This will then be infused by the promoters as equity in the units. This will benefit around 2, 00,000 MSME’s. They will also be a Tax Reduction at Source (TDS) rate reduction. This will be equivalent to 50,000 crores.


Government to People

Government has commented that the health of the people comes first. PM Garib Kalyan Package of 1, 70,000 crores offers 5 Kg wheat and Rs. 500 to the Jan Dhan Account. To farmers, they are offering Rs. 17400 crores. Out of which, Rs 2000 will be deposited to the account of every farmer. The banks will be willing to lend Rs 86,600 crores to farmers. This will later increase agricultural production and will boost the GDP. There is also an Emergency Health Response Package of Rs. 15,000 crores. This is part of the COVID cost. They have also decided to spend on other factors. They spend Rs. 4200 crores for rural infrastructure, 5000 crores to street vendors and Rs. 70000 crore for Housing Loan Interest Subsidy.

Now related to banks, the Government has reduced the Cash Reserve Ratio (CRR). This is one of the key changes made by the government. A reduction in CRR will result in more money in the hands of banks to lend. The incremental amount of Rs, 1, 37,000 crores will be delivered to the banks to lend.

The Narendra Modi Government’s much-hyped 20-trillion fiscal package disappointed individuals and companies, who had expectations of audacious stimulus measures to revive the economy. The Indian Economy has remained almost idle for the past two months. The announcements made during the last 5 days involve a small amount of direct spending by the Central Government, and the package may not be adequate enough to revive the demand in the economy. 



By: Anantha Krishnan


Bangalore, India | epicenter.newsmedia@gmail.com

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