Detailed Explanation on Economic Stimulus Package of 20 Lakh Crores
The mega Rs 20 lakh crore stimulus package announced on Tuesday by Prime Minister Narendra Modi includes previously announced measures to save the lockdown-battered economy, and focuses on tax breaks for small businesses as well as incentives for domestic manufacturing. The combined package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world after the financial packages announced by the United States, which is 13 per cent of its GDP, and by Japan, which is over 21 per cent of its GDP.
The Rs 20 lakh crore package includes Rs 1.7 lakh crore package of free foodgrains to poor and cash to poor women and elderly, announced in March, as well as the Reserve Bank's liquidity measures and interest rate cuts. While the March stimulus was 0.8 per cent of GDP, RBI's cut in interest rates and liquidity boosting measures totaled to 3.2 per cent of the GDP (about Rs 6.5 lakh crore).
"A special economic package is being announced to make India self-reliant," Narendra Modi said in his third address to the nation over COVID-19 pandemic. "This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10 per cent of India's GDP."
Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of coronavirus. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity.
According to the latest government data, Rs 34,800 crore financial assistance using digital payment infrastructure were provided to about 39 crore beneficiaries.
Under the Pradhan Mantri Garib Kalyan Ann Yojana 67.65 lakh MT of foodgrains have been lifted by 36 states/UTs for April 2020. Around 16 LMT of foodgrains have been distributed, covering 60.33 crore beneficiaries by 36 states/UTs for April 2020.
Major Announcements in Point:
- All TDS Rates have been slashed by 25% w.e.f 14/05/2020 upto 31/03/2021
- All the Income Tax Refunds has been issued immediately to all the taxpayers including Company, LLP, Proprietorship, etc
- Due Dates for Income Tax Returns extended to 30th Nov 2020 from 31st July 2020 for Individuals & 30th Sept 2020 for Corporates
- Tax Audit Date Extended to 31/10/2020 from originally 30/09/2020
- Time Barred Assessments as on 30/09/2020 shall be extended to 31/12/2020 and those barring on 31/03/2021 shall be extended to 30/09/2021
- Vivad se Vishwas scheme has been extended to 31st December 2020.
- Aatma NIrbhar Bharat rests on five pillars: Economy, Infrastructure, Technology-driven systems, Demography, and Demand.
- Focus on factors of production: Land, Labour, liquidity and Laws.
- Intention is to make local brands global. Aatma Nirbhar Bharat aims at making India self-reliant and contribute globally as well.
- The government had announced a PM Garib Kalyan Yojana for the poor. In addition, the RBI has announced moratorium for loans.
- DBT has helped in putting money directly into the hands of the beneficiaries. Schemes like PM Kisan helped in front loading benefits for farmers during lockdown.
- Rs 52,606 crore DBT transfer into 41 crore Jan Dhan accounts under PM Garib Kalyan Yojana.
- 14 crore tax payers benefited from tax refunds fast tracked by tax department.
- Six major steps for MSME sector. Collateral free loan of Rs 3 lakh crores for those units with Rs 25 cr outstanding or 100 cr turnover. Tenor of 4 years with moratorium.100% credit guaranteed. This will benefit 45 lakh units so that they resume work and save jobs.
- For stressed MSMEs, Subordinate debt provision of Rs 20,000 cr has been announced for 2 lakh MSMEs. It will benefit those which are NPAs or stressed MSMEs.
- For MSMES that are viable but need hand-holding, a fund of funds with corpus of Rs 50,000 crore will help these units expand capacity and help them list on Markets if they choose.
- Definition of MSMEs has been revised to allow MSMEs to aim for expansion and not lose benefits. Also, there'll be no distinction between manufacturing & services sector MSMEs. New definition: Micro units with investment till Rs 1 cr, turnover up to Rs 5 crore. Small units with investment till Rs 10 cr, turnover up to Rs 50 cr. Medium units with investment till Rs 20 cr, turnover up to Rs 100 crore.
- Global tenders will be disallowed up to Rs 200 crore government contracts.
- Will ensure e-market linkages are provided across the board in the absence of non-participation in trade fairs. Govt of India and PSUs will clear all the receivables in next 45 days.
- EPF contribution of Rs 2,500 crore that will benefit 72.22 lakh employees has been extended till August.
- Statutory EPF contribution for organisations has been reduced to 10% from 12% . This doesn't apply to govt organisations. This will infuse Rs 6,750 cr liquidity into these organisations.
- Rs 30,000 crore special liquidity scheme for investing in investment grade debt paper of NBFCs, HFCs and MFIs. These NBFCs are those that are also funding MSMEs. These will be fully guaranteed by government of India.
- Rs 45,000 crore partial credit guarantee scheme for NBFCs. The first 20% loss will be borne by the guarantor that is government of India.
- For Discoms, a one-time emergency liquidity injection of Rs 90,ooo crore against all their receivables.
- Govt contractors given extension of up to six months.
- On real estate, urban development ministry will issue advisory to states/UTs so that the regulators can invoke force majeure. The regulators can suo moto extend completion/registration dates for six months.
- TDS & TCS rates reduced. This will release Rs 50,000 crores.
