Economic Package: 2020 Pandemic

Introduction:

On 12^th May 2020 at 8:20 PM which is 20:20 in a 20 mins speech, Prime Minister Mr. Narendra Modi announced an Rs.2000000000000 (hereinafter: “20 Lakh CRS”) economy package. As India fights its battle with COVID 19, an economic stimulus package was announced by the Prime Minister Mr. Narendra Modi. On 12^th May 2020 at 8:20 PM which is 20:20 in a 20 mins speech, announced a Rupees 20 Lakh CRS. By the time you finish counting the zeros, Finance Minister Nirmala Sitharaman broke it down for us.

What does the package hold for you?

There are 2 types of economic policies, one is Monetary policy which is framed by The Reserve Bank of India (hereinafter: “RBI”). This policy controls inflation, analysis of side effects on exchange rates and housing markets, and change in interest rates and money supply. This policy is theoretically independent from the political influence. On the other hand, we have a Fiscal Policy that is governed by The Government of India (hereinafter: “GOI”). It frames the tax rates of different commodities, spending money in required fields, etc. It has a strong political dimension to it. The money in question, 20 Lakh Crs is again divided into various parts. The package includes Rs 8 Lakh Crs liquidity infusion by the RBI, which makes this package a monetary package to some extent and a few other schemes which have been accumulated to 20 Lakh Crs today.

Liquidated Infusion

This economic stimulus is a fiscal policy plan . 8 Lakh Crs of the 20 Lakh Crs, have been put into the package by RBI is a reserved liquidity infusion of the bank. It is called ‘liquidity infusion’ because it means that this amount was not being used in the economy and it was a liquidated asset simply lying in the bank. RBI is making use of this liquidated asset by lowering their loan interest rates also known as ‘repo rates’ that the other bank use to take it in. Doing so ensures that the loan interest rates have been lowered for the public. This helps to infuse liquidated reserved money of the RBI into the Indian Economy in the form of loans. In conclusion, the 8 Lakh Crs stimulus package would have a negligible effect on the consumer’s end.

The Breakdown of the Package

Out of the 20 Lakhs Crs, 12 Lakhs Crs is remaining after deducting the 8 Lakhs Cr. Out of the 12 Lakhs Crs, 1.7 Lakhs cr has been added from the previously announced stimulus package such as Pradhan Mantri Swasthya Suraksha Yojana (PMMSY) that was announced in the union budget 2019. So now to talk about the remaining 10+ Lakhs Crs, it has been divided into various sectors:-

1. MSME (Micro, Small & Medium enterprise) – Rs.3 Lakh CRS has been set aside for such enterprises. These loans are going to be lower in interest and collateral-free.
2. Power DISCOMS (power distribution)- There would be a liquidity infusion worth Rs. 90,000 CRS. This money is also a collateral-free loans with lowered interest rates.
3. Farmers and Agricultural sectors – Rs. 2 Lakh CRS have been allocated for farmers as a concessional credit which is also a collateral-free lowered rate loans
4. Street Vendors– Rs. 5,000 Crs have been allotted to street vendors as a concessional credit.
5. Migrant Workers – For migrant workers, for June and July 2020, free food grain shall be provided which is approximately costing Rs. 3,500 CRS to the government. It has been calculated that this scheme shall benefit the population of 8 crores of migrant workers. “One ration, one nation” scheme has also resurfaced. All the workers under the MNREGA shall be provided with employment, making it the highest ever allocated scheme of Rs. 1 lakh cr.

Conclusion

This entire economy package is that basically, the people and the companies are being given out loans at lower interest rates and without collateral. It will certainly help boost the economy but one thing that must be paid attention to is, this scheme is not a monetary relief paid by the GOI but only a loan given to the people. It shall bring relief to the people as all the workplaces have been shut due to the lockdown. Looking at the long term benefits, this scheme is not helping the public in the long run but merely providing a crutch at the time of distress. This economic package is certainly beneficial and the GOI and our PM have helped the lower class. The package might not be super beneficial for the salaried or entrepreneurs but have helped in terms of supporting the daily wagers. The promised employment for the workers under the MNREGA has been provided by the regeneration of different viability gap projects. Viability gap projects are the social infrastructure projects like roads, bridges, etc which have also been allotted Rs. 8000 CRS. This ensures project completion and employment for the daily wagers.