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Finance Minister Nirmala Sitharaman on Monday announced Rs 1.5 lakh crore of additional credit for small and medium businesses, more funds for the healthcare sector, loans to tourism agencies and guides, and waiver of visa fee for foreign tourists as part of a package to support the pandemic-hit economy.
Together with previously announced Rs 93,869 crore spending on providing free foodgrains to the poor till November and additional Rs 14,775 crore fertiliser subsidy, the stimulus package – mostly made up of government guarantee to banks and microfinance institutions for loans they extend to Covid-hit sectors – totalled up to Rs 6.29 lakh crore.
Addressing a press conference, Sitharaman said, “Economic relief measures are being announced today.”
She provided Rs 23,220 crore of additional funding for setting up children and paediatric care/paediatric beds at hospitals to prepare healthcare infrastructure to deal with any emergency arising for Covid wave hitting children.
To incentivize job creation, the government committed to paying the employer and employee’s share to provident fund (PF) for all new recruitments done till March 2022. Previously, the government paid Rs 902 crore for 21.42 lakh beneficiaries of 79,577 establishments.
With the tourism sector being hit hard by the pandemic, she announced up to Rs 10 lakh loan to tourist agencies and Rs 1 lakh loan to tourist guides while waiver of visa fee for the first five lakh foreign tourists visiting India after travel restrictions ease. Tourist visa fee waiver will cost the government Rs 100 crore.
Other announcements included an additional Rs 19,041 crore for providing broadband internet cover to all village panchayats, an extension of tenure of production linked incentive (PLI) scheme for large scale electronics manufacturing by a year and Rs 88,000 crore of insurance cover for goods exporters.
The support measures were announced as states start lifting restrictions after new coronavirus infections showed a decline. The economy seems to be on a recovery path after being hit by a devastating second wave of infections that was dubbed as the world’s worst Covid-19 surge.
Sitharaman said the Emergency Credit Line Guarantee Scheme is being expanded to Rs 4.5 lakh crore from Rs 3 lakh crore. Under the scheme, a collateral-free loan is provided by banks to small businesses and the government stands guarantee for any default.
The ECLGS, launched last year, has helped cash-starved small businesses raise funds during the Covid-19 lockdown for working capital and to meet their orders. As much as Rs 2.73 lakh crore has been sanctioned under the three previous ECLGS programmes, of which Rs 2.10 lakh crore has already been disbursed.
Another Rs 1.1 lakh crore loan guarantee scheme for Covid-affected sectors was announced. This included Rs 50,000 crore for the health sector, with a three-year single loan of Rs 100 crore carrying an interest of 7.95 per cent. Loans to other sectors such as tourism and hospitality would come at 8.25 per cent per annum interest rate.
Also, micro-finance institutions will extend 25 lakh small borrowers loans of up to Rs 1.25 lakh at an interest rate that is 2 per cent lower than the benchmark lending rate, she said.
The government also extended the loan guarantee programme to the tourism sector, after last month widening it to airlines and hospitals.
Financial Services Secretary Debasish Panda said the objective of credit guarantee is to encourage banks to lend to enterprises so that they get credit at low cost. The measures announced Monday are “to ensure money comes into hands of small, medium and large enterprises,” he said.
The credit programme supplements separate measures announced by the Reserve Bank of India (RBI) last month to boost credit for health care services and provide fresh lending to vaccine-makers. It provided an on-tap liquidity window for banks worth Rs 50,000 crore to extend credit to health services and vaccine manufacturers until March 2022.
The extension of free foodgrains to 80 crore poor till November will cost Rs 93,869 crore more, bringing the total cost of the programme to more than Rs 2.27 lakh crore, she said.
The government had last year announced the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to provide free 5 kg per month of foodgrains to over 80 crore poor to help them tide over the impact of stringent lockdown imposed to curb the spread of coronavirus infections.
Stating that the wheat procurement has touched an all-time high of over 432 lakh tonnes in the Rabi marketing season of 2021-22, she said the government will provide an additional subsidy of Rs 14,775 crore to farmers directly for buying DAP and other complex fertilisers.
The additional amount will raise the fertiliser subsidy to Rs 42,275 crore.
DK Srivastava, Chief Policy Advisor, EY India, said the thrust of this package is to stimulate the sagging growth in credit offtake mainly by providing interest rate concessions with a focus on priority sectors such as health, power and other infrastructure.
Of the measures announced, the Centre will see an additional outgo of Rs 93,869 crore on free food grains, Rs 15,000 crore on health (its share out of Rs 23,220 crore spending) and Rs 9,520 crore for village broadband connectivity (Rs 19,041 crore for two years).
This totals to Rs 1,18,390 crore or 0.5 per cent of estimated GDP for 2021-22, Srivastava said.
While Samantak Das, Chief Economist and Head Research & REIS, JLL said the measures announced are “timely booster shots to keep the economy afloat”, Aditi Nayar, Chief Economist, ICRA Limited said the announcement contained a mix of new schemes focussed on relief for the pandemic-affected sectors, the extension of earlier schemes, as well a reiteration of recent announcements such as free food grains.
