India's Finance Minister reveals the final lot of Modi's economic stimulus programme

Finance Minister Nirmala Sitharaman unveiled the fifth and final tranche of stimulus measures to revive India's economy revealed.Press Information Bureau
  • The fifth tranche of stimulus measures to revive India's economy revealed today.
  • This is part of the ₹20 lakh crore, about $270 billion, package promised by Prime Minister Narendra Modi.
  • Get the latest news and updates on the unravelling COVID-19 crisis on Business Insider.
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The fifth tranche of stimulus measures to revive India's economy revealed today. This is part of the ₹20 lakh crore, about $270 billion, package promised by Prime Minister Narendra Modi.

In the first four tranches, the government has already announced expenditure of about ₹18 lakh crore ($240 billion), about 9.3% of India's gross domestic product (GDP), which will widen fiscal deficit by about half a percentage point, according to Nomura. RBI and Finance Ministry have already spent nearly half of Narendra Modi's ₹20 lakh crore stimulus even before the steps were announced.

The Modi administration has used the COVID-19 crisis to push through many long-term reforms like the liberalisation of the coal and mining sector, higher foreign direct investment (FDI) limit in defence, opening up more airspace to reduce flying time for airlines, and thereby reducing fuel demand, to name few.

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Aside from these, there has been short-term cash injection for a wide range of sectors from micro, small and medium (MSME) businesses, non-banking financial companies, farming and allied activities including fisheries and animal husbandry, and migrant workers among others.

These are the top highlights from Sitharaman's speech on May 17:

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Today's announcements related to Mahatma Gandhi Rural Employment Guarantee programme (MNREGA), healthcare, decriminalisation in certain aspects under the Companies Act, improving ease of doing business, central public sector enterprises, and resource allocation between centre and state governments.

Mahatma Gandhi Rural Employment Guarantee Act (MNREGA)

The government adds ₹40,000 crore to the budgeted allocation to provide employment for migrant workers who have gone back to their villages from the cities.

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Health infrastructure:

Investment in health and wellness centres in rural and urban areas will be ramped up. All districts will have an infectious diseases block. There will be an integrated public health labs in all districts, at the block level labs. A public health unit will also be set up to manage pandemics. National Digital Health Blueprint will also be implemented.

On May 16, the Finance Minister said that the government will provide ₹8,100 crore viability gap funding ⁠— increased up to 30% from 20% earlier ⁠— for private investment in social infrastructure like hospitals.

Digital education:

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Prime Minister's e-Vidya (e-education) programme for digital/online education wil be launched immediately.

Another programme DIKSHA, for school education to provide digital content and QR-coded text books in states and Union Territories. ‘One class, one channel’ programme will be used to educate children of the same class. One TV channel per class from 1 to 12 has been earmarked. There will be special e-content for visually and hearing impaired.

Top 100 universities will be permitted to automatically start online courses by May 30, 2020.

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Bankruptcy law:

"Any indebted situation that comes up because of coronavirus will not be considered as default and no fresh insolvency proceedings will be initiated for the next one year," Finance Minister said. A special insolvency framework will be notified under Section 240 A of the Insolvency and Bankruptcy Act.

The threshold for initiating insolvency proceedings for micro, small, and medium enterprises will be raised by 10-fold to to ₹1 crore.

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These measures will be enforced via ordinance and then later taken to Parliament for approval.

Companies Act:

Decriminalisation of Companies Act violations involving minor and technical defaults like shortcomings in CSR reporting, inadequacy in board report, fixing defaults, delay in holding AGM. 40 new sections have been added — it was 18 earlier — to the 'internal adjudication' mechanism to reduce the harrasment of companies, and the pressure of cases on courts.

Companies can now list their securities directly in permissible foreign jurisdictions. Private companies which list their non-convertible debentures on stock exchanges will not be regarded as listed companies.
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Public sector enterprises:

There will be 2 categories:

Government of India will notify 'strategic sectors' where at least one public sector enterprises will be present while private players will be allowed to.

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There will be another set of strategic sectors, where there won't be more than four public sector enterprises; private sector will also come in. If there are sectors where there are too many government companies, they will be brought together in such a way ⁠— including via mergers and privatisation ⁠— that there won't be more than four. A detailed policy will soon be issued.

Allocation of resources of state governments:

RBI has increased Ways and Means Advance limits of States by 60%. Currently, the net borrowing ceiling of states for 2020-21 is ₹6.41 lakh crore — 3% of gross state domestic GSDP. The government has increased the net borrowing from 3% to 5%. This will make ₹4.28 lakh crore available as extra resources to the states.

Part of the borrowing will be linked to specific reforms, from 3% to 3.5%, will be unconditionally extended.
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We will release the 1% in 4 tranches of 0.25% with each tranche linked to clearly specified, measurable and feasible reform actions. The next 0.5% will be given as soon as milestones are achieved in atleast three of four reform areas.

The article will be updated as she speaks.

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