Sitharaman outlines stimulus package and structural reforms

Wednesday 20th May 2020 05:31 EDT

India's finance minister Nirmala Sitharaman on Sunday announced the fifth and final tranche of £200 billion economic package given under Prime Minister Narendra Modi’s Aatmanirbhar Bharat Abhiyaan initiative. Sitharaman said that in the last four days of announcements, the government has had several reforms addressing the land, labour, liquidity, and laws. The package also includes additional liquidity injected into the system by the Reserve Bank of India through various measures in February, March and April and the £17 billion fiscal package announced on March 27.

Break-up of all the five tranches of the package:

The focus of the first tranche was to alleviate the sweeping distress in the Micro, Small and Medium Enterprises (MSME) sector that lies at the heart of the industrial ecosystem that employs an estimated 110 million people, including much of the country’s migrant workforce. While the 16 specific announcements announced in the first tranche cut across sectors that range from MSME and Non Banking Finance Companies (NBFCs) to real estate and power distribution and the salaried, the overarching theme was that of infusing liquidity. It will ultimately puts more disposable funds in the hands of both entrepreneurs and employees.

Total amount– £59.45 billion.

Second tranche

Unveiling the second tranche of the economic stimulus package as part of ‘Self-reliant India Mission’ to cushion the impact of Covid-19, Sitharaman announced three measures for the distressed migrant workers. Firstly, migrant workers, who are neither National Food Security Act (NFSA) or State Card beneficiaries in the state they are stationed, will be provided 5 kg of grains per person and 1 kg Chana per family per month free for two months, the Finance Minister said.

Sitharaman also announced the ‘One Nation One Ration card’ scheme under which migrants will be enabled to access Public Distribution System from any Fair Price Shop in the country by March 2021. This is part of the PM’s Technology-Driven System Reforms.

Total amount – £31 billion.

Third tranche

Sitharaman announced 11 measures for the agriculture sector as part of the third trench of the relief package. However, most of these measures are either in place already or the government has been discussing these for several years. Out of the 11 announcements, three concern governance and administrative reforms, including amendment of the Essential Commodities Act (ECA), 1955, and agriculture marketing reforms through a Central law. These have been part of successive Union Budgets under the Modi government.

Sitharaman also announced the setting up of a £10 billion Agri Infrastructure Fund; the formalisation of Micro Food Enterprises, with an outlay of £1 billion; a vaccination drive against food and mouth disease among cattle; extension of the Operation Greens from tomatoes, onion and potatoes to all fruits and vegetables; help for fishermen through the Pradhan Mantri Matsya Sampada Yojana; a £1.5 billion Animal Husbandry Infrastructure Development Fund; £400 million for promotion of herbal cultivation; and a £50 million scheme to promote beekeeping.

Total amount – £15 billion

Fourth tranche

Most of the measures for eight sectors announced under the fourth tranche were either a new push to old reforms proposals or an aggregation of earlier decisions. The latter includes: commercial coal mining; coal gasification projects; building a hub for aircraft maintenance, repair and overhaul (MRO); privatisation of airports, and optimisation of Indian air space.

The renewed push for commercial mining is a proposal over two years old. A way to auction coal mines/blocks for sale of coal under the provisions of the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957, it was approved by the government in early 2018 and an order was issued on February 27, 2018. Subsequently, the Coal Ministry said it had identified “15 large coal blocks” for the pilot round of bidding in December that year.

Fifth tranche

Addressing her fifth press conference in as many days, the minister began her speech by quoting Prime Minister Narendra Modi while addressing the reporters. She said, “In order to prove the resolve of the self-reliant India, land, labour, liquidity and laws, all have been emphasised in this package,” and added that, “We have announced several reforms in this regard and shall continue with the same today.”

Earlier measures including Pradhan Mantri Garib Kalyan Package (PMGKP) – £19.28 billion

RBI measures (actual) – £80.16 billion

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