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Bengaluru: The Finance Minister has announced a series of new measures amounting to Rs 2.65 lakh crore aimed at boosting demand as well as supply. The bouquet of measures is expected to augment demand through incentivisation. Employment generation is the key focus of the package in third round.

The Government has launched a subsidy support scheme to incentivise the creation of new employment opportunities during the Covid-19 recovery phase.

Benefits under the new scheme will be availed by (i) any new employee joining employment in EPFO registered establishments on monthly wages less than Rs 15,000, and (ii) EPF members drawing monthly wages of less than Rs 15,000 who made exit from employment during the Covid-19 pandemic from 01 Mar-30 Sep and are employed after 01 Oct’20.

As per EPFO data, if we purely go by current trends, we believe that almost 15-20 lakh employees will get benefitted from this scheme by Mar’21. Government has also provided support for the rural economy by allocating additional Rs 10, 000 crore to PM Garib Kalyan Yojana.

The ECLGS scheme which has so far performed well, has now been extended to COVID-19 impacted sectors listed in Kamath Committee Report. ECLGS 2.0 can provide much needed relief to stressed sectors including Auto Component, Constructions, Gems & Jewellery, Hotel and Restaurants, Iron & Steel, Real Estate, Textile etc. by helping entities sustain employment and meet liabilities.

We believe potentially around 40,000 entities can benefit from the scheme. However, if the overall amount stays at Rs 3 lakh crore, the overall corpus of ECLGS 2.0 could be a constraining factor.     

The boost to housing continues even in third round. In order to provide further boost to Housing and Real Estate, the Government has provided additional Rs 18,000 crore to Prime Minister Awaas Yojana – Urban (PMAY-U) through additional allocation and Extra Budgetary Resources. Real estate tinkering with tax incentives for home buyers could potentially unleash a price discovery in real estate market.

The performance linked incentive scheme has now been extended to 10 other sectors, including advance chemistry and cell battery, Electronics/ technology products, Automobiles & Auto Components, Pharmaceutical drugs, etc. with a financial outlay of Rs 1.45 lakh crore over a period of 5 years, to support manufacturing and exports. Further support to EXIM Bank will also push project exports.

The thrust to infrastructure is now visible with Rs 6000 crore equity infusion in NIIF Debt Platform. The Equity infusion will facilitate the fund to raise Rs 95000 crore as debt to finance infrastructure worth Rs 1.1 lakh crore by 2025 through the infrastructure financing arm.

Other notable measures such as the allocation of fund to R&D for Covid Suraksha Mission for R&D of Indian Covid Vaccine to Department of Bio-technology. Overall the third round might stretch the fiscal deficit for FY21 which is estimated at 19.2 lakh crore or 10.3% of GDP. Overall, the stimulus measures announced today are expected to push the economy to a higher growth path over the medium term.

The Government has announced Rs 65,000 crore to ensure adequate availability of fertilisers to farmers in the upcoming crop season, which will benefit 140 million farmers in the country. Currently, almost 70% of the purchase price of urea is subsided by the central government.

In case of non-urea fertiliser, though the prices are market-linked, there is an element of subsidy in them as well. We believe there is a need to shift to DBT in fertiliser subsidy so that farmers can make choices about use of different nutrients based on soil nutrient status.

Interestingly, under the PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi), total 26.9 lakh application have been received so far of which loan has sanctioned to 13.9 lakh applicants worth Rs 1393 crore. Almost 75% applications have been received from Uttar Pradesh (7.3 lakh) followed by Telangana (4.3 lakh) Madhya Pradesh (3.3 lakh), Maharashtra (3.0 lakh) and Andhra Pradesh (2.1 lakh). However, only few applications are received from West Bengal (2.5K), Jharkhand (18.4K) and Odisha (38K), showing dismal performance by these states.

Author: Dr. Soumya Kanti Ghosh
Group Chief Economic Adviser, State Bank of India.

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