Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs

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Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
Diwali stimulus: Finance Minister Nirmala Sitharaman unveiled a fresh set of measures to battle the economic crisis worsened by the COVID-19 crisis, ahead of peak festivities in the country. PIB via You Tube
  • The Indian government unveiled a fresh set of measures amounting to ₹2.65 lakh crore ($35 billion) to battle the economic crisis worsened by the COVID-19 crisis.
  • From tax relief for home buyers to a new platform to provide debt for infrastructure projects, additional outlay for affordable housing in urban India to providing incentives to creating formal jobs, there were a slew announcements today.
  • Check out the latest news and updates on Business Insider.
While she cheered the recovery in the Indian economy, citing green shoots in everything from railway freight movement to demand for power to recent rally in stock markets, Finance Minister Nirmala Sitharaman unveiled a fresh set of measures to battle the economic crisis worsened by the COVID-19 crisis, ahead of the Diwali festivities in the country. The total value of the fresh stimulus was pegged at ₹2.65 lakh crore ($35 billion).

Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
The break-up of the fresh set of stimulus announced by the Finance Minister Nirmala Sitharaman on November 12.PIB via YouTube

Sitharaman asserted that the government has committed a total of 15% of GDP in trying to revive the economy, including today's measures, and that has led to recovery in the economy since the lows in the April-June to quarter. To back her argument, Sitharaman cited the report international ratings agency Moody's, which said the contraction in gross domestic product (GDP), for financial year ending 2021, could be 8.1% as opposed to its previous estimate 9.6%. "It is not just pent up demand, it is sustainable, strong growth. It is getting unrelenting systemic reforms undertaken by the government," she said.

Here's a break up of the total stimulus announced by the government so far.

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Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
The Indian government said that between the treasury and the Reserve Bank of India, it has committed 15% of GDP on reviving the economy from the COVID-19 crisis. This includes the $35 billion in incentives and relief measures announced today.PIB via YouTube

ALSO READ: Atmanirbhar Bharat: Indian government’s report card on the implementation of the COVID stimulus so far

These are highlights of the measures announced by the Indian Finance Minister on November 12:

1. Every establishment that is registered with the EPFO will be incentivised to hire people who did not have a EPFO number or those who lost the EPFO number between March 1 and September 30 this year.

2. This will be effective from October 1, 2020.
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Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
The Indian government announced new measures to boost formal employment. PIB via YouTube

3. The following subsidy will be applicable for those EPFO numbers linked with Aadhaar:
Eligible companiesSubsidyDuration of the subsidy
Companies with up to 1,000 employees24% of wages Two years
Companies with more than 1,000 employees12% of wages (employee's contribution to EPF)Two years

ALSO READ: Atmanirbhar Bharat Rozgar Yojana: FM announces benefits for EPFO-registered firms hiring new employees — centre to bear PF for new employees

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4. 65% of the formal workforce will benefit from this, Nirmala Sitharaman said.

5. The emergency credit line guarantee scheme, which promised collateral-free, fully guaranteed, loans up to ₹3 lakh crore, has been extended till March 31.
Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
Out of the ₹3 lakh crore of emergency credit, collateral free and fully guaranteed, two-thirds of the target amount has already been sanctioned to over 6 million loan seekers, Finance Minister Nirmala Sitharaman said. PIB via YouTube

6. Additional guaranteed credit for 26 stressed sectors, identified by the KV Kamath committee.

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Here's the break up of India's $35 billion Diwali stimulus⁠— from income tax relief for home buyers to incentives for formal jobs
Details of the credit support provided to 26 stressed sectors. PIB via YouTube

7. The government to add ₹18,000 crore to the outlay for affordable housing programme in urban areas. "This will help 1.2 million homes to be grounded and 1.8 million more to be completed," she said. This will create 7.8 million new jobs by bringing in demand for 2.5 million tonnes of steel and 13.1 million tonnes of cement, she added.

8. Boost for construction sector: A 'bid security declaration', a lot like self declaration, will replace the need to provide earnest money deposit for construction projects. This will be applicable until March 2021. This will bring down the cost of bank guarantees.

9. Performance security for ongoing contracts, which are not under dispute, will be reduced to 3% compared to the existing range of 5% to 10%.
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10. For new homes sold, there will be an income tax relief for home buyers.

As of now if the cost of the house is more than the circle rate by more than 10%, the excess amount is taxable. That threshold has been increased to 20% until June 2021. This will be applicable for homes under the price of ₹ 2 crore.

Here's an example of how much a home buyer may save:
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Circle rate (assumed)Home price (assumed)
₹1₹2 crore


ParticularsExisting policyNew policy
Excess allowed₹10 lakh ₹20 lakh
Taxable amount₹90 lakh₹80 lakh
Tax (assuming a rate of 30%)₹2.7 lakh ₹2.4 lakh
Savings₹30,000

ALSO READ: India offers income tax relief for home buyers and developers to boost new property sales

11. National Investment and Infrastructure Fund will set up a platform to fund ₹1.1 lakh crore infrastructure debt. The government will invest ₹ 6,000 crore as equity. The rest of the money will be raised from private investors.

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12. ₹65,000 crore will be provided to farmers to ensure availability of fertilisers in time ahead of the oncoming crop season.

13. Additional outlay of ₹10,000 crore, which could be used for anything from ensuring employment guarantee to construction of rural roads or any other project that help the informal economy in rural India.

14. An additional ₹3,000 crore credit lines for Indian companies that are executing projects like railways, power, transmission, road construction, auto components etc in other countries, and in the process, exporting inputs from India. These loans will be routed via the via EXIM Bank.

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15. ₹ 10,200 crore, over and above the budgeted amount, will be provided to capital and industrial expenditure. Focus areas: Domestic defence equipment, industrial incentives, industrial infrastructure, and green energy.

16. ₹900 crore to be given to the Department of Biotechnology to support the development of COVID-19 vaccine.

17. She also cited the production-linked incentives for ten sectors, announced by the government on November 11. The outlays mentioned are earmarked to be disbursed over the next five years.

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SectorsMinistryApproved financial outlay over five-year period
Advance Chemistry Cell (ACC) BatteryNITI Aayog and Department of Heavy Industries₹18,100 crore
Electronic/Technology ProductsMinistry of Electronics and Information Technology₹5,000 crore
Automobile and Auto ComponentsDepartment of Heavy Industries₹57,042 crore
Pharmaceutical drugsDepartment of Pharmaceuticals₹15,000 crore
Telecom and Networking ProductsDepartment of Telecom₹12,195 crore
Textile Products: MMF segment and technical textilesMinistry of Textiles₹10,683 crore
Food ProductsMinistry of Food and Processing Industries₹10,900 crore
High Efficiency Solar PV ModulesMinistry of New and Rewnable Energy₹4,500 crore
White Goods (ACs & LED)Department of Promotion of Industry of Internal Trade₹6,238 crore
Speciality SteelMinistry of Steel₹6,322 crore
Total₹1,45,980 crore


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