On 12 September 2020, the finance minister of India, Nirmala Sitharaman announced a set of relief measures for the economy, keeping in mind the need to boost the Covid-19 affected economy and re-employment of those who’ve lost jobs. A day before that, the RBI had announced that India had entered into a ‘technical recession’ in 2020-21 fiscal year. The 12 areas covered as part of Atmanirbhar Bharat 3.0 across key sectors are well targeted, and promise to kick-start the engines of growth in the economy by bolstering demand, investments, exports and job creation.
What is a stimulus?
Attempts to use monetary or fiscal policy to stimulate the economy. Stimulus can also refer to monetary policies like lowering interest rates and quantitative easing. A stimulus is sometimes colloquially referred to as ‘priming the pump’.
The idea behind a stimulus package is to provide tax rebates and boost spending, as spending increases demand, which leads to an increase in employment rate which in turn increases income and hence boosts spending. This cycle continues until the economy recovers from collapse.
The package includes:
·The size of the stimulus under the package amounts to Rs2.65 lakh crore, taking the total stimulus announced by the GoI and RBI till date to Rs29.87 lakh crore, which works out to a significant 15% of national GDP.
·The package focuses on incentivising new employment through measures in both the formal and informal sectors of the economy.
·Atmanirbhar Bharat Rozgar Yojana - will create new employment opportunities and is likely to benefit crores of workers. Under the scheme, new employees under the Employees’ Provident Fund Organisation (EPFO)-registered organisations will enjoy benefits, including subsidy support by way of EPF contributions. The scheme is expected to cover 65% of employees and 95% of establishments in the formal sector.
·Prime Minister Garib Kalyan Yojana - additional outlay of Rs10,000 crore will boost rural employment in the informal sector and encourage the growth of the rural economy.
·PM Awas Yojana - employment will also be created through the infrastructure and housing incentives and spending, including 7.8 million.
·Emergency Credit Line Guarantee Scheme (ECLGS) - extended the till March 31 2021, to provide liquidity support to the 26 stressed sectors of the economy, including healthcare, by providing collateral free and 100% guaranteed loans.
·Production-Linked Incentive (PLI) scheme – is also extended. It will cover 10 more champion sectors to boost competitiveness and encourage domestic employment.
·The government will provide 65,000 crore as fertiliser subsidy to ensure adequate production.
·Indian Development and Economic Assistance (IDEAS) scheme – Rs 3,000 crore boost for promotion of project exports.
·Budget investments for capital and industrial expenditure on green energy, defence equipment, etc.
·Development of Covid-19 vaccines - R&D grant of Rs900 crore to the biotechnology sector.