Nirbharta starts at home

Context – Covid-19 crisis has provided Govt an opportunity to go for large scale reforms to write India’s growth story, starting with the announcement of a massive package of ?20 trillion.

Philosophy behind the 20 lakh crore rupees stimulus

• Self-sufficiency and self-reliance.

• Self-reliance connected to localisation and also closely linked with the global supply chains. India’s prosperity is linked with global prosperity.

Supply side measures

• MSMS Sector

• 3 trillion rupees collateral free loan. It will have four-year tenure with no payments due for one year. This will create market for bonds which is needed to modernise corporate finance in India.
• Allocation of 20000 crore rupees subordinate debt aimed to help stressed MSME.
• Infusion of 50000 crore rupees in equity funds for MSMEs.
• Change in the definition of MSMEs. It will encourage companies to grow larger without losing the benefits provided in category.
• To promote MSME, Govt has excluded foreign companies from bidding for govt contract below 200 crore rupees.

• NBFCs, Housing Finance Companies (HFCs), Micro Finance Institutions (MFIs)

• 30000 crore rupees special liquidity scheme to these companies.
• Partial credit guarantee loan worth 45000 crore rupees to these companies which will fund MSME. Govt will bear 20% loss on these loans.

• Power Distribution Companies 

• Infusion of 90000 crore rupees.
• Revenue decline due to sharp decline in demand, power theft, open-ended giveaways.

Demand Side measures

• TDS and TCS are to be cut by 25% for the remainder of the current fiscal year.
• Date for collection of income-tax for FY2020 has been extended to Nov 2020.

Past Experience

• Productivity with competition in Industries is the most important requirement  to sustain.
• For Example – India Drug and pharmaceutical Limited could not survive because of lack of competition. Now India’s pharmaceutical industry is proliferating because of linkage with global supply chain and competition.

Present status

• Uttar Pradesh, Madhya Pradesh has suspended the application of labour laws for 3-4 years.
• Issue with labour laws: India need ILO compatible laws safeguarding the health and grievance redressal. It should be supplemented by unemployment insurance and retraining. 

What more needs to be done

• Land reform for quick acquisition, for making tenancy simple and popular. By this, small unviable farm can be converted into large viable farms.
• Permission for conversion of agriculture into non- agriculture land should be made free.