The Centre has agreed to demands from States to hike their borrowing limits from 3% to 5% of their GDP in light of the COVID-19 crisis, but on the condition that they implement specific reforms.
The fifth and final tranche of the Atmanirbhar Bharat Abhiyan stimulus package, announced by Finance Minister Nirmala Sitharaman on Sunday, also included an additional ₹40,000 crore allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and a new policy welcoming private companies into every sector of industry, while limiting public sector enterprises to strategic sectors only. Corporate enterprises were also offered some relief via changes to the Insolvency and Bankruptcy Code (IBC) and the Companies Act.
Atmanirbhar Bharat Abhiyan | First tranche | Second tranche | Third tranche | Fourth tranche
The total package amounts to almost ₹21 lakh crore by the Centre’s accounting, but is heavy on credit-related measures, including ₹8 lakh crore worth of liquidity enhancing measures by the RBI. Some analysts felt that this amounted to double counting as the credit guarantee schemes to support small companies and non-banking finance companies would also tap into the RBI’s measures.
“The final picture shows that of the ₹20.97 lakh crore stimulus package — which amounts to 9.8% of GDP — only ₹2.2 lakh crore can be traced as direct additional budgetary cost to the Central exchequer, while another ₹1.55 lakh crore relates to already budgeted expenditures,” said Ernst and Young chief policy adviser D.K. Srivastava, who is also on the Advisory Council for the 15th Finance Commission.
“The remaining 85% comes from the RBI’s liquidity announcements, credit guarantee schemes and insurance schemes, apart from the structural reforms which are not really stimulus or relief measures.”
The decision to allocate ₹40,000 crore to the MGNREGS scheme in addition to the ₹61,000 crore allocated in the Budget was widely welcomed, as a measure that will support rural livelihoods at a time when returning migrants swell unemployment in the villages.
However, given that States account for 40% of MGNREGS expenditure, including most upfront costs, they will also have to be willing to spend on the scheme.
Also read | In 2015, Narendra Modi termed MGNREGS a living monument of Congress failures
State go