Amidst the economic crisis caused by the devastating second wave of coronavirus in the country, Finance Minister Nirmala Sitharaman announced a host of relief measures for small-scale industries, healthcare and tourism sectors, farmers, state governments, employees as well as microfinance users. The scheme focuses largely on providing concessional credits, extending loan guarantees, and ramping up investments to empower severely pandemic-hit sectors. The total financial implications of the stimulus package amount to Rs. 6.29 lakh crores, which includes Rs. 1.1 lakh crore for healthcare investments in non-metropolitan areas, an additional sum of Rs. 1.5 lakh crore for emergency Credit-Link Guarantee Scheme, new Rs. 7,500 crore scheme to guarantee loans to 25 lakh small borrowers, indirect support for exports worth Rs. 1.21 lakh crore, and reiteration of existing schemes such as high fertilizer subsidies, provisions of food grains to the poor, etc. A separate investment worth Rs. 23,220 crores have been allocated to expand pediatric care by increasing ICU beds, oxygen supply, augmenting medical care professionals, etc.

   How the Second COVID-Package can Bolster Economy?

·  Extension of Performance-Linked Incentive (PLI) Scheme for Electronics Manufacturing

Launched in mid-2020, the Rs. 40,995-crore PLI scheme for electronic components and mobile phones aims to grow domestic production to 10.5 trillion and amplify exports worth Rs. 6.5 trillion in the next five years. Both global and local companies like Micromax, Lava, Samsung, Foxconn, Pegatron, etc. had secured approval under the PLI scheme. However, the majority of these 16 companies were unable to meet the targets due to repeated lockdowns, restrictions on the movement of goods and personnel along with bottlenecks in supply chains, etc. Therefore, the government has extended the tenure of the PLI scheme for the beleaguered large-scale electronics manufacturing industries. Now, the manufacturers would be eligible to claim the six percent incentive for incremental manufacturing till 2025-2026, and even those who made investments in 2020-21 will get counted under the extended scheme.

 

• Universal and Equitable Access to Broadband Services 

The government had launched the ambitious National Broadband Mission to provide broadband access across the country, especially across rural and remote areas. The mission envisages laying of 30 lakh route km of optical fiber cable and increasing tower capacity from 5.56 lakh to 10 lakh to fast-track growth of digital communications infrastructure and bridge the digital gap. So, the funding of 19,041 crores through the BharatNet public-private partnership model is in line with PM Modi’s vision to connect every inhabited village within 1000 days under the Digital India initiative. Of the targeted 6 lakh villages, more than 1.56 blocks have been covered under the National Broadband Mission till May 31, 2021, and the next outlay will be utilized to connect the balance. As the adoption of digital services is increasing, the additional funding will act as a catalyst to support the socio-economic development of the country.

 

• Streamlining Processes for PPP Projects and Asset Monetization

The current process for seeking approvals for Public-Private Partnership (PPP) projects is long and tedious as it involves approvals at multiple levels and frequent delays. The government is planning to formulate new policies for appraisal, approval, and monetization of core infrastructure assets, that will cut down bureaucratic tape and accelerate the approval processes. The Department of Economic Affairs (DEA) will be soon announcing the budget on asset monetization plan to enhance efficiency of private sectors in financing construction and management of infrastructure.

 

• Boosting Merchandise Export 

The government has planned to infuse equity in Export Credit Guarantee Corporation (ECGC) of India for boosting merchandise export insurance cover by Rs. 88,000 crores over a five-year period. The ECGC supports around 30% of India’s merchandise exports by providing credit insurance services to less creditworthy borrowers and supporting project exporters. Besides, the additional corpus will be provided to National Export Insurance Account (NEIA) over five years to underwrite additional Rs. 33000 crore of project exports.

 

• Spurring Investment Climate in the Country 

The government has extended the current limit for Emergency Credit Line Guarantee Scheme (ECLGS), launched as a part of the Atmanirbhar Bharat Package in May 2020 by Rs.1.5 crore, raising the investment from Rs. 3 lakh crore to Rs. 4.5 lakh crore. Increasing the limit of admissible guarantee and loan amount above the existing level of 20% on each outstanding loan would help banks, non-banking financial institutions, and other lending institutions struggling to meet working capital requirements.

 

The new Credit Guarantee scheme will facilitate loans to 25 lakh people through microfinance institutions that will benefit even the smallest of the borrowers in the hinterland, including small towns. Under the scheme, the interest rate on loans from banks will be capped at the marginal cost of funds and the maximum tenure of the loan will be three years. Besides, the interest rate would be at least 2% below the prescribed rate by Reserve Bank of India (RBI) and 80% of assistance would be used by micro finance institutions for incremental lending.

 

Boosting Tourism Sector

With lockdown restrictions in place, the tourism sector is facing the biggest crisis of all time. Therefore, the government has planned to allocate Rs. 60,000 crores for providing financial support to over 10,700 registered tourist guides and travel agencies recognized by the Ministry of Tourism, and tourist guides by the States Governments. Besides, recognized 1000 Travel and Tourism Stakeholders (TTS) will be eligible for Rs. 10 lakh financial aid. Besides, tourist guides can also avail loans up to Rs. 1 lakh each, and the government will not charge any processing fees, the waiver for foreclosure/prepayment, or any additional collateral. Another major boost for the tourism sector is the issuance of free 5 lakh tourist visas for a month. The total financial implication for the free visa scheme sums around Rs. 100 crore and regular visa fees will be resumed after the expiry date. 

 

• Restoring Employment 

Launched on 1st October 2020, Atmanirbhar Bharat Rozgar Yojana incentivizes employers for creating new job opportunities and restore employment amid COVID-19. Under the scheme, the organizations falling under EPFO-registered establishments, that are recruiting new employees are eligible for a special EPF subsidy from the central government. Under the scheme, the government will be providing 24% EPF subsidies (12% of the employers' share and 12% of the employees) to firms with less than 1,000 employees, whereas the government will bear half of the EPF contribution for firms with more than 1000 employees to reduce human resource costs and boost take-home pay of low-income wage workers. Since October 2020, about 21.42 lakh beneficiaries in 79,000-odd establishments have gained support from the scheme, and Rs. 902 crores have been disbursed so far. The scheme has now been extended from June 30, 2021, to March 31, 2022, to provide relief to the employers as the economy is slowly recovering from the second wave of the COVID-19 pandemic.  

 

• Scaling up Medical Infrastructure 

As the second wave of coronavirus hit, the country witnessed a huge lack of basic healthcare facilities that resulted in the loss of hundreds of lives. Out of the 1.1 lakh crore financial aid, the Centre has planned to allocate Rs. 50,000 crores to ramp up healthcare infrastructure across the country. The private healthcare sector played an instrumental role in reducing the intensity of crisis as they were able to provide treatment when public healthcare failed to do so. Therefore, the financial aid intends to provide support to the hospitals in tier 2 and tier 3 cities facing severe challenges. The Rs. 50,000-crore loan guarantee scheme will encourage the private sector healthcare groups to invest further for expansion in remote areas and smaller cities while enhancing the quality of treatment care. Besides, the allocation of Rs. 23,200 crores will be beneficial for strengthening pediatric healthcare facilities by strengthening ambulance services, enhancing testing capacity, enabling enhanced access to teleconsultation, etc. so that the country is prepared better for the third wave. However, the increased outlay of Rs. 50,000 crore is useful only for the short term as the investment needs to be multi-fold to change the healthcare landscape of the country. 

 

• Continuous Support to Needy 

As the coronavirus crisis continues to ameliorate the hardships faced by the poor due to repetitive economic disruptions, the center has relaunched the Pradhan Mantri Garib Kalyan Yojana (PMGKY) to provide food grains to the poor and needy. The estimated financial implication of the scheme is expected to be around Rs. 93,869 crore. Under the scheme, every needy would be provided with five kg of free-of-cost food grains to ensure the security of poor/vulnerable groups. The scheme has been extended till November 2021. Besides, an additional subsidy amount of Rs. 14,775 crores will benefit farmers for DAP (Diammonium Phosphate) and P&K (phosphorus & potassium) fertilizers. 

 

• Upgradation of Infrastructure 

The Rs. 3.03 lakh crore power distribution reforms scheme is set to bring major reforms with state-specific intervention in place instead of following a one-size-fits-all approach. Under the scheme, the government proposes to merge different projects like Integrated Power Development Scheme, Deen Dayal Upadhyay Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana. The objective of the scheme is to install 25 crore smart meters, 4 lakh km low tension overhead lines, and 25 crore smart meters. 

 

Conclusion 

The relief measures will certainly help to alleviate the economic distress in the country, particularly for contact-oriented businesses like travel and tourism and small businesses. MSMEs, MFIs, and unorganized sectors are the biggest employment generator in India so, these measures will help promote employment and recover the economy gradually. Besides, the up-gradation of health infrastructure would help to strengthen the fight against the pandemic.