- The government has announced a fresh set of relief and stimulus measures (Atmanirbhar Bharat 3.0) for the economy worth Rs 1.2 lakh crore.
- Broadly, the measures aim to boost job creation, provide liquidity support to stressed sectors and encourage economic activity in housing and infrastructure areas.
About: Atmanirbhar Bharat 3.0
Measures for stressed sectors:
- The government has revised its Rs 3-lakh-crore emergency credit line guarantee scheme (ECLGS) to include fresh loans to 26 stressed sectors identified by the KV Kamath-headed committee, and the healthcare sector.
- As per the Kamath committee, the stressed sectors include auto components, construction, gems and jewellery, hotel and restaurants, iron and steel, real estate and textiles.
- Earlier, the (ECLGS) was available only to small businesses. The revised scheme extends it to stressed sectors, irrespective of their turnover and will be available until March 31, 2021.
- Entities in 26 stressed sectors as well as the healthcare sector, with credit outstanding of above Rs 50 crore and up to Rs 500 crore as on February 29, are eligible for funding under the scheme.
- Companies that have loan dues up to 30 days as on February 29, 2020 will be provided 20% additional credit for a period of five years.
- There will be a moratorium of one year on the repayment of the principal amount. A moratorium period is the time during which the borrower is not required to pay the loan instalments
- These measures will provide significant relief to companies that are expected to recover along with the improvement in economic activity, but are facing shortage of funds.
Measures for real estate sector:
- The government has allowed buyers to purchase homes at 20% below the circle rate without attracting any tax penalties. The new norm is for residential units up to Rs 2 crore.
- Circle rate is the government-defined value at which property is registered, whereas agreement value is the one negotiated between the builder and the buyer.
- As prices of many unsold units have fallen below circle rates in many cities due to the economic downturn, market rates are much below the circle rates in these cities.
- Earlier, if the developer sold property below the circle rate, the differential between the circle rate and the agreed rate was taxable for both buyer and seller.
- Last year, the government allowed developers to sell at rates up to 10% lower than the circle rate without attracting additional tax. The government has now doubled the differential to 20%. This benefit will be available until June 30, 2021.
Increased allocation for PMAY-Urban:
- The government has increased allocation to give subsidy under the Prime Minister AwasYojana (PMAY-Urban) by Rs 18,000 crore, over and above the Rs 8,000 crore already allocated in the Budget.
- Under PMAY, the government gives interest subsidies on loans between Rs 2.35 lakh and Rs 2.7 lakh.
- As per the finance ministry, the move would create 78 lakh jobs, and improve production and sale of steel & cement, giving a boost to the overall economy.
Measures for construction and infrastructure:
- To free up working capital for contractors bidding for public projects, the Centre has decided to reduce the performance security payable on individual contracts to 3% from the current rate of 5% to 10% of project value.
- The earnest money deposit requirement to bid for tenders is also being replaced by just a bid security declaration for a period of one year.
- These relaxations have been provided until December 31, 2021 and will act as a major relief for the construction sector and will increase their financial ability to carry out the project.
- The government has also announced Rs 6,000 crore of equity in the National Investment and Infrastructure Fund (NIIF) to support debt financing totalling Rs 1.1 lakh crore by 2025.
Measures to boost employment
Atmanirbhar Rozgar Yojana launched:
- To boost formal sector employment, a new Atmanirbhar Rozgar Yojana has been launched by the government.
- Under this, the government will pay the Employees’ Provident Fund (EPF) contributions for two years of all new employees hired between October 1, 2020 and June 30, 2021.
- The definition of ‘new employee’ has been kept flexible to include anyone who was part of the EPF net earlier, but had lost their job between March 1 and September 30, 2020. This may help improve such workers’ re-employment prospects.
- Details of the scheme:
- Under the scheme, the government will pay the PF contribution for workers with wages up to Rs 15,000.
- For establishments employing up to 1,000 employees, the total PFcontribution of 24 per cent for both employers and employees will be paid by the government.
- For establishments employing more than 1,000 employees, the employees’ share of 12 per cent will be contributed by the government.
- To be eligible for the scheme, firms having more than 50 employees must hire at least five new workers, while those with less than 50 employees must hire a minimum of two workers.
- The scheme will cover nearly 99.1% of all establishments and an estimated 65% of all those employed under the formal sector.
Additional funding for Pradhan Mantri Garib Kalyan Rozgar Yojana:
- The government has also announced an additional funding of Rs 10,000 crore, for employment under the earlier announced scheme of the Pradhan Mantri Garib Kalyan Rozgar Yojana.
- The government had earlier identified 116 districts across six states where at least 25,000 workers have returned in each district to provide employment to migrant workers for 125 days by bringing together nearly 25 schemes.
- An amount of Rs 37,543 crore has been spent till now under the scheme.
Measures for increasing employment in rural areas:
- To increase rural employment, an additional Rs 10,000 crore has been provided for spending through the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and PM Gram Sadak Yojana (PMGSY).
- Effectively, this takes the total allocations for MGNREGA in the year close to Rs 1.1 lakh crore. Around, Rs 73,504 crore has already been spent to generate 251 crore person days of employment in this year.
- The measures also include a Rs 65,000 crore additional funding for providing fertilizer subsidies to farmers, to support increasing demand due to good monsoon and sharp increase in the crop-sown area.
- As per the finance ministry, the recovery in the economy reflects strong economic growth.
- Even the RBI now expects the economy to contract at a slower pace in the second quarter than earlier expectations.
- However, the RBI also said that there are several risks to growth due to the second global COVID-19 wave which could impact global growth, and India’s exports.
- Thus, it is not yet clear whether the recent improvement in the economy will continue beyond the festival season.