FM Sitharaman’s package 2: Everything you wanted to know

The FM unveiled the second tranche of Prime Minister Modi’s special economic package of 20 lakh crore on Thursday. (14/5/2020). The second set is worth Rs.3.16 lakh crore

[You may read- What does Modi’s 20 lakh crore package mean? ]

She had announced the first tranche on Wednesday. [You may read- FM Sitharaman’s package 1: Everything you wanted to know]]

The second tranche of the PM’s package is mainly focused on migrants, street vendors, farmers, and small businesses

Migrants

• Provide free food grains for the next two months to migrants who do not have a ration card. Over 8 crores migrants will benefit. (offer 5 kg of rice/ wheat per person and 1 kg chana per family for the next 2 months). The Government will spend Rs. 3,500 crore on this.
• Roll-out nation-wide portability on ration cards through ‘One Nation-One Ration Card’ scheme by March 2021. It will help migrant workers to access subsidised ration from any fair price shop in the country. It is expected to benefit about 67 crore beneficiaries of 23 Indian states by August. As of now, beneficiaries are able to procure ration only from designated fair price shops. [Note: A pilot project for the inter-state portability of ration cards between Telangana and Andhra Pradesh, and between Maharashtra and Gujarat was rolled out last year.]

Farmers

• Concessional credit to farmers: National Bank for Agriculture and Rural Development (NABARD) will provide refinance support of Rs 30,000 crore to regional rural banks (RRBs) and co-operatives. This will be given to provide concessional loans to small and marginal farmers . This will be over and above the refinancing already done for loans worth Rs.90000 crore. This is expected to help around 3-crore farmers meet post-harvest (Rabi) & current Kharif requirements in May and June.
• Enrolment in Kisan credit card: Bring 2.5-crore additional farmers under Kisan Credit Card (KCC) to help them access concessional loans from banks, amounting to ₹2 lakh crore. [Under KCC, the loan is available at a concessional rate of 7 percent. If the loan is paid on time, an additional subsidy of 3 percent is provided.]

[You may read- Mass Exodus of Migrant Workers due to COVID-19]

Affordable housing

• Extend the Credit Linked Subsidy Scheme for Middle Income Group (with an annual income of ₹6-18 lakh), which ended on March 31, 2020, till March 2021. This scheme provides interest subsidy on housing loans. [You may read- What is credit-linked subsidy scheme (CLSS)?]
• Proposed a scheme under the Pradhan Mantri Awaas Yojana that will provide houses at an affordable rent for migrant labourers/urban poor. It intends to convert government-funded housing in the cities into Affordable Rental Housing Complexes under the Public-private partnership (PPP) model. State government agencies/Central Government organisations, manufacturing units, industries, institutions, associations will be incentivised to develop and operate Affordable Rental Housing Complexes

Small businesses

• Interest subvention scheme on SHISHU loan under the MUDRA scheme for small businesses: A SHISHU loan has a cap of Rs.50,000. The RBI had already announced a moratorium for 3 months on all such loans. So, after-May, the government will provide interest subvention of 2 percent for prompt payees for a period of 12 months. (In effect, the borrower who repays early will have to pay 2 % less interest). The total beneficiaries under this scheme will be more than 3 crores. The total outlay is estimated at Rs.1,500 crore. [You may read: What is MUDRA bank?]

Street Vendors

• Special credit facility to street vendors within a month. This is to facilitate easy access to the initial working capital of up to ₹10,000 for each vendor. This is expected to support nearly 50-lakh street vendors with liquidity support of Rs.5,000 crore. 

That’s all. The Government might have launched these schemes with the right intention, but it is not clear how it will help the migrants and vendors who are unregistered. They are most in need of immediate support.

Further, most of the measures are related to credit grants. Some analysts say that direct cash transfers would be better to promote demand in the economy.

To end this post, we take a look at the direct fiscal cost of this package worth Rs 3.16 lakh crore

Of total Rs 3.16 lakh crore worth announcements made yesterday, the Centre’s cash outlay will be around Rs 14,500-14,750 crore, rest is in the forms of loans and liquidity.

Finally, if one were to add this 3.16 lakh crore with fiscal and monetary measures of Rs. 13.88 lakh crore already done earlier, we get Rs.17.04 lakh crore. So that’s about 17 lakh crore out of 20 lakh crore economic package accounted for.

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