Nirbharta starts at home

The Economic Times     14th May 2020     Save    
QEP Pocket Notes

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 ExampleIndia 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.  
QEP Pocket Notes