Here's a breakup of Narendra Modi's ₹20 lakh crore stimulus⁠— RBI measures make up for nearly half of it

• Finance Minister Nirmala Sitharaman on May 18 announced the last tranche of the ₹20 lakh crore stimulus package.
  
• The economic stimulus package included measures like free food grains, hike in foreign direct investment for defence, liquidity measures for MSMEs, amended in Essential Commodities Act, increase in public expenditure in health, among others.
  
• While the Narendra Modi government promised to allocate 10% of the GDP, the Reserve Bank of India’s measures accounts for nearly half the economic package.
  
  

Finance Minister Nirmala Sitharaman on May 18 announced the last tranche of the ₹20 lakh crore Atma Nirbhar Bharat Abhiyan economic package to fight the coronavirus pandemic led economic slowdown in the country. However, while the Narendra Modi government promised to allocate 10% of the GDP, nearly half of the stimulus package is spent by the Reserve Bank of India.

Global investment bank Goldman Sachs said that most of the reforms announced by the Indian government will have an impact in the medium term while the short term may see a "deeper recession", and added that the country's real GDP growth may fall 5% in the current financial year ending March 2020.

The economic stimulus package included measures like free food grains, hike in foreign direct investment for defence, liquidity measures for MSMEs, amendments in Essential Commodities Act, increase in public expenditure in health, among others.

Whereas, the RBI package included measures like moratorium on loan repayments for all borrowers,and interest rate cut etc. “RBI has announced ₹9 lakh crore plus, but the actual money utilised (so far) is ₹8 lakh crore,” FM Nirmala Sitharaman said while explaining the break-up of the stimulus package.

PM Narendra Modi said the package was designed keeping in mind factors like land, labour, liquidity and laws.


Here’s a breakdown of India’s ₹20 lakh crore stimulus package:

The first tranche worth ₹5.94 lakh crore provided a credit line to small businesses and support to shadow banks and electricity distribution companies

There were 15 measures, of which 6 were for MSMEs. The definition of SMEs was changed and the investment limit to qualify as MSMEs was raised. During the first tranche, Sitharaman announced ₹3 lakh crore collateral-free automatic loans for businesses. Apart from this, the government also increased the deadline for real estate projects.

The second tranche included free foodgrains to stranded migrant workers for two months and credit to farmers, totalling ₹3.10 lakh crore

There were nine announcements in all in the second tranche of the stimulus package which focussed on migrant workers, small traders, small farmers etc. The government announced free food grain supply to migrant workers for 2 months. A National portability of ration cards — One Nation, One Ration card — was announced which allowed people to take ration from any public distribution unit in the country.


The third tranche was worth ₹1,50,000 crore and focused on farming and related activities

Sitharaman promised to allocate money and quickly ramp up policies in these spaces. The government allocated ₹1 lakh crore to strengthen farm-gate infrastructure. The government said the Essential Commodities Act will be amended to deregulate prices of cereals, edible oils, oilseeds, pulses, onions, potatoes etc. According to Ashok Gulati, former chairman of Commission of Agricultural Costs and Prices (CACP), this will allow market prices to prevail over essential commodities.

The government also removed stock limit imposed on processors or value chain participants or any exporter subject to export demand,


The fourth and fifth tranches that dealt mostly with structural reforms were worth ₹48,100 crore

The reforms focused on coal, minerals, defence production, civil aviation, power distribution in Union Territories, space and atomic energy. India opened up more of its airspace for airlines, and also decided to put 6 airports up for auction. The government said airlines will fly on shorter routes which would save ₹1,000 crore a year. Separately, the government allowed startups in the space sector to use resources of Indian Space Research Organisation.

In the fifth tranche the government added ₹40,000 crore budget allocation in the Mahatma Gandhi Rural Employment Guarantee Act (MNREGA). However, according to a financial services company Nomura, the minimum wage job may be a temporary relief and once the lockdown is over, urban businesses will struggle with the shortage of labour.

Several experts have criticised the government’s latest economic package and said it is inadequate to provide immediate relief to the distressed part of the society.

“The package may fall short of mitigating the near-term existential crisis for businesses and workers, but is better designed to improve India’s medium-term growth potential and attract long-term risk capital. As a consequence, we maintain our GDP growth projection for 2020 at -5% y-o-y,” Noaura, a global market research firm said.


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