Finance Minister Nirmala Sitharaman announced 12 key measures under the Aatmanirbhar Bharat stimulus package 3.0 to boost the Indian economy. Net stimulus announced amounts to ₹2.65 lakh crores. Let’s breakdown and understand the key focus of the Aatmanirbhar Stimulus 3.0.
Crux of the Matter
To date, the Government and RBI have announced stimulus worth ₹29.87 lakh crores – 15% of national GDP – to revive the economy. As per Finance Minister Sitharaman, stimulus worth 9% of GDP has been already disbursed. The following infographic outlines the details of all Covid-19 stimulus announced by the government and the RBI.
The Aatmanirbhar Stimulus 3.0 amounts to ₹2.65 lakh crores. Here is the breakdown of the package.
Production Linked Incentive (PLI)
Under PLI companies get incentives for producing in India, also giving a boost to the ‘Make in India’ campaign. PLI was formerly available for mobile and electronics components manufacturing in India. Under the latest package, ~₹ 1.5 lakh crores were allocated across 10 champion sectors for the next 5 years.
Aatmanirbhar Bharat Rozgar Yojana
Introduced to incentivize formalization of job creation, this scheme has been extended to tackle job loss due to Covid-19. Nearly 1.21 crore beneficiaries availed benefits through ~1.5 lakhs establishments in 2019-20.
Emergency Credit Line Guarantee Scheme
Entities across 27 stressed sectors with credit outstanding of above ₹50 crores and up to ₹500 crores as of 29/2/2020 will get additional credit up to 20% of outstanding credit with a tenor of 5 years, including 1-year moratorium on principal repayment.
PM Awas Yojana – Urban
Introduced to help ground 12 lakh and complete 18 lakh houses. It will also create 78 lakh direct and indirect jobs, improve production and sale in steel, cement, and associated sectors.
Platform For Infra Debt Financing
The government will infuse ₹6,000 crores through equity investment in the debt platform of the National Investment Infrastructure Fund (NIIF). NIIF will distribute ₹1.1 lakh crores for infrastructure projects by 2025.
Support To Farmers
To meet the increasing demand for fertilizer in the country, govt has allocated ₹65,000 crores to ensure its constant supply.
Boosting Rural Employment
To boost rural employment, the government has allocated ₹10,000 crores to PM Garib Kalyan Rozgar Yojana to provide rural employment.
Step Towards Self Reliance
In this stimulus package, the government has also allocated ₹900 crores for research and development of the Covid-19 vaccine and ₹10,200 crores for capital and industrial expenditure on domestic defence equipment, industrial infrastructure and green energy. Moreover, under Indian Development and Economic Assistance Scheme (IDEAS Scheme), govt will provide ₹3,000 crores to EXIM Bank (Export-Import Bank) for promoting exports.
- The theory behind the usefulness of a stimulus package is rooted in Keynesian economics. It argues that recessions are not self-correcting, and therefore government intervention can lessen the impact of a recession.
- Beginning in 2008 many nations of the world enacted fiscal stimulus plans in response to the Great Recession. The International Monetary Fund recommended that countries implement fiscal stimulus measures equal to 2% of their GDP to help offset the global contraction.
- Fiscal consolidation is a process where the government’s fiscal health is getting improved and is indicated by a reduced fiscal deficit. Improved tax revenue realization and better aligned expenditure are the components of fiscal consolidation.