New Delhi: Prime Minister Narendra Modi has announced that a “new lockdown” will continue beyond the end of the current phase on 17 May, but that the government will provide a massive special economic package to revive the economy that has been battered by the Covid-19 pandemic.
The total cost of the package will be Rs 20 lakh crore. The PM said it would be named ‘Atmanirbhar Bharat Abhiyan’ (literally, self-reliant India campaign).
Modi said the fiscal package, which will benefit labourers, farmers, honest tax payers, MSMEs and cottage industries, equals to 10 per cent of India’s GDP. This will be the fifth largest package announced by any country to tide over the economic impact of the novel coronavirus.
“The package will have emphasis on land, labour, liquidity and laws, and will pave the way for a self-reliant India,” PM Modi said, adding that Finance Minister Nirmala Sitharaman will announce the contours of the package starting Wednesday.
“This package is for that worker in the country, that farmer, who is working hard day and night; for the Indian middle class, for the industry which is committed to make India stronger.”
As part of the package, Modi hinted at sops for the middle class and Indian corporates as well as changes in customs duties on imports to make Indian products competitive. This could mean lowering of import duties on raw materials needed for products manufactured in India, as well as higher import duties on finished products to ensure Make in India becomes successful.
Modi said the Rs 20-lakh crore-package will include previous steps announced by the Reserve Bank of India, along with the measures announced by the government to tackle the fallout of Covid-19 in March.
The government’s decision to provide cash transfers and free foodgrains to India’s poor totalled around 1 per cent of GDP.
Liquidity boosting measures announced by the RBI in two tranches were equivalent to around 3.5 per cent of GDP.
Besides providing a three-month loan moratorium, the RBI announced liquidity infusion measures through different routes, including those to specific sectors like non-banking finance companies, micro finance institutions and housing finance companies.
The Modi government had also announced a Rs 40,000-crore production-linked incentive scheme to encourage large-scale electronics manufacturing in India in March. It remains to be seen if this will be included into the calculations of the economic package.
New structure for lockdown
In the speech that lasted over half an hour, Modi also announced a differently structured lockdown from 18 May, when the current 54-day twice-extended lockdown is set to end.
The PM said the lockdown will have new rules, framed after taking inputs from all the states and union territories.
“Information on what all will be part of the new lockdown will be provided to the citizens before 18 May,” he said.
Setting the stage for the government’s exit strategy, Modi had, in his video-conference meeting with chief ministers Monday, said that in the coming days, economic activities that have slowly started picking up pace in several parts of the country will further gather steam.
‘Along with the fiscal package, India needs bold reforms’
The PM said the special economic package will have to be complemented with bold reforms in every sector, be it the supply chain or rational tax reforms.
Modi said the reforms will be based on five pillars — economy, infrastructure, systems based on 21st century technology-driven arrangements, vibrant demography and demand.
“We will have to have an economy which will not bring incremental change but quantum jump, infrastructure that will become the identity of modern India, and a strong supply chain…” he said.
“These reforms include supply chain reforms for agriculture, rational tax system, simple and clear laws, capable human resource and a strong financial system. These reforms will promote business, attract investment, and further strengthen Make in India,” the PM added.
Hinting that the intended beneficiaries were previously left out because of poor reforms, Modi credited the reforms ushered in by his government behind India’s strong response to the Covid-19 pandemic.
“It’s because of reforms like JAM (the Modi government’s initiative to link Jan Dhan accounts with Aadhaar cards and mobile numbers to plug leakages in subsidies)… otherwise who would have thought that every rupee announced by the government would reach the poor?” Modi said.
Giving an example of how India has turned the adversity caused by Covid-19 into an opportunity, Modi said earlier, India did not manufacture personal protective equipment or N-95 masks, which are necessary to protect against the virus. But today, India is manufacturing 20 lakh each of PPE kits and N-95 masks, Modi said.
“Time has taught us that we must make ‘local’ the mantra of our lives. Global brands that are there today were once local too, but when people there started supporting them, they became global. That is why from today, every Indian must become vocal for our local,” the PM said.