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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- 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.
AdvertisementWhile 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).
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.
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.
3. The following subsidy will be applicable for those EPFO numbers linked with Aadhaar:
|Eligible companies||Subsidy||Duration of the subsidy|
|Companies with up to 1,000 employees||24% of wages||Two years|
|Companies with more than 1,000 employees||12% of wages (employee's contribution to EPF)||Two years|
4. 65% of the formal workforce will benefit from this, Nirmala Sitharaman said.
Advertisement5. The emergency credit line guarantee scheme, which promised collateral-free, fully guaranteed, loans up to ₹3 lakh crore, has been extended till March 31.
6. Additional guaranteed credit for 26 stressed sectors, identified by the KV Kamath committee.
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%.
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:
|Circle rate (assumed)||Home price (assumed)|
|Particulars||Existing policy||New 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|
Advertisement11. 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.
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.
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.
Advertisement16. ₹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.
|Sectors||Ministry||Approved financial outlay over five-year period|
|Advance Chemistry Cell (ACC) Battery||NITI Aayog and Department of Heavy Industries||₹18,100 crore|
|Electronic/Technology Products||Ministry of Electronics and Information Technology||₹5,000 crore|
|Automobile and Auto Components||Department of Heavy Industries||₹57,042 crore|
|Pharmaceutical drugs||Department of Pharmaceuticals||₹15,000 crore|
|Telecom and Networking Products||Department of Telecom||₹12,195 crore|
|Textile Products: MMF segment and technical textiles||Ministry of Textiles||₹10,683 crore|
|Food Products||Ministry of Food and Processing Industries||₹10,900 crore|
|High Efficiency Solar PV Modules||Ministry of New and Rewnable Energy||₹4,500 crore|
|White Goods (ACs & LED)||Department of Promotion of Industry of Internal Trade||₹6,238 crore|
|Speciality Steel||Ministry of Steel||₹6,322 crore|
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