Atmanirbhar Bharat Abhiyan: Key highlights of COVID-19 India Economic Package of Rs 20 lakh crores
- May 18, 2020 | Divita S Gupta
As India progresses toward the fourth phase of the nationwide lockdown, finance minister Nirmala Sitharaman has announced the provisions and plans under the Atmanirbhar Bharat Abhiyan (Covid-19 relief package). This briefing from the finance minister comes after Prime Minister Narendra Modi’s fifth address to the nation on the novel Coronavirus pandemic. India has been on a nationwide lockdown since mid-March, and this lockdown will continue to the end of May and depending on the number of cases is likely to spill into June. Lockdown and quarantine procedures have greatly affected economies across the world, and in a bid to offer relief to its citizens, several countries are introducing economic relief measures. Here are the key highlights of the Atmanirbhar Bharat Abhiyan.
Income Tax relief measures
● Reduction in the rate of TDS and TCS
The tax deducted at source (TDS) for non-salaried specified payments made to residents and rates of tax collection at source (TCS) will be reduced by 25% for FY 2020-21 from May 14, 2020.
● Immediate issue of pending refunds
All pending tax refunds to the following categories of organisations will be issued immediately.
● Charitable trusts
● Non-corporate business including Proprietary business, Partnership, Limited Liability Partnership and Cooperatives.
● Deadline to file returns extended
The deadline to file income tax returns for the FY 2019-20 and tax audit has been extended to October 31, 2020.
Real estate and urban development relief measures
● Invoke COVID-19 as force majeure
COVID19 to be treated as force majeure to extend completion timelines by six months for all construction and development projects that were supposed to expire on March 25, 2020.
● Government contractors granted 6 months extension
All Government contractors under railways, roadways, public works have been granted an extension of 6 months without additional penalty or cost.
Employee Provident Fund relief measures
● EPF reduced from 12% to 10% for 3 months
Employee Provident Fund contribution has been reduced for both the employer as well as the employee for a period of 3 months from 12% to 10% so that organisations reduce the percentage of a pay cut to employees.
● EPF support by Government extended from May to August
The Government will be providing support up to ₹2,500 crores as a contribution to Employee Provident Fund till August 2020.
Relief measures for non-banking finance corporations (NBFCs)
● Partial credit guarantee scheme for NBFCs
The Government has announced ₹45,000 crores worth liquidity infusion under the Partial Credit Guarantee Scheme for NBFCs.
● Special liquidity scheme to be introduced
A special liquidity scheme up to ₹30,000 crores will be announced for NBFCs under which investments will be made in primary and secondary markets, housing finance companies and microfinance firms with Government guaranteed securities.
Liquidity boost for distribution companies
● ₹90,000 crore boost for power distribution companies
The Government has announced a boost package of ₹90,000 crores for power distribution companies with plummeting revenues. Under this package, loans will be given against state guarantees for the exclusive purpose of clearing of distribution company liabilities to power generators.
Relief measures for MSMEs
● Definition of MSME revised
The limits for investment will be revised, thereby changing the definition of MSMEs. MSMEs will now be categorised based on their turnover. As per the new guidelines, these are the following categories for MSMEs.
● Businesses with investment up to ₹10 crores, and turnover up to ₹50 crores to be classified as a small business.
● Businesses with investment up to ₹20 crores, and turnover up to ₹100 crores to be classified as a medium-sized business.
● Equity funding for MSME up to ₹50,000 crore
The Government has announced a Fund of Funds to provide equity funding for MSMEs with potential. The initial corpus investment for the same will be up to ₹50,000 crores.
● Subordinate debt for stressed MSMEs
Non-performing and stressed MSMEs would be eligible for a subordinate debt offered by the Government. Equity support up to ₹20,000 crores will be provided under this package.
● Collateral free loans for MSMEs
MSMEs, having up to ₹25 crore outstanding loans and a turnover of ₹100 crores, will be eligible for collateral-free loans with a 4-year tenure and 1 year of moratorium.
Finance Minister, Nirmala Sitaraman in her press briefing said that this economic package would address issues of ease of doing business, build homegrown brands championing the country’s ‘Make in India’ cause and help take local brands to a global level. While today’s press briefing only covered 60% of the measures under the Atmanirbhar Bharat Abhiyan, the entire package is said to take up at least 10% of India’s GDP, making it one of the most significant economic relief packages in the world.
In her second press briefing in less than ten days, Finance Minister, Nirmala Sitaraman on May 17, informed the country about the remainder of the economic reforms that will be implemented soon. Here are key highlights from the second press briefing that introduced the fifth tranche of the economic package.
Centre to increase funding under MGNREGS
● Allocation of an additional ₹41,000 crore to MGNREGS
The Centre will fund an additional ₹41,000 crore over the already allocated ₹61,000 crores to the Mahatma Gandhi National Rural Employment Guarantee Scheme. This will ensure that migrant workers who have returned to their homes due to the Coronavirus pandemic and subsequent lockdown will have employment.
Healthcare gets a boost
● All hospitals to have an infectious diseases block
Hospitals will be directed to set up a separate block for diagnosis and prognosis of infectious diseases along with public health labs. Centre will also increase funding and investments in health institutions and services in rural areas. The Health Ministry has released ₹4,113 crores to States for anti-COVID 19 activities.
Reform measures under education
● Digital learning will take the lead
The Centre will be allowing top 100 universities in India to start online classes from next month. They will also be funding for setting up of DIKSHA digital platform for distribution of e-content to schools across India.
● Mass communication means for furthering education
The Centre will be allocating funds to extensively use television, radio, community radio and podcasts to distribute educational content to students across the country. Special provisions to be made for content distribution to visually impaired students.
Decriminalisation of Companies Act
● Violations moved to internal adjudication mechanism
A majority of violations under the Companies Act involving minor technical and procedural defaults including shortcoming in CSR reporting, inadequacies in board report, filing defaults and delay in holding AGM will be decriminalised.
No insolvency under IBC for a year
● Defaulting companies provided relief
Under the new guidelines, the Centre has announced that no fresh insolvency will be initiated for a period of one year under the Insolvency and Bankruptcy Code.
● The threshold for insolvency initiative increased to benefit MSMEs
An ordinance will be issued to increase the minimum threshold to initiate insolvency proceeding from ₹1 lakh to ₹1 crore in a bid to benefit MSMEs.
Coherent public sector enterprise policy to be formulated
● Industry sectors will be divided into strategic sectors
Industry sectors will be listed as strategic and under those notified as strategic, at least one public sector enterprise will still be present. Still, the private sector will also be allowed. In other sectors, public sector enterprises will be privatised.
The Atmanirbhar Bharat Abhiyan economic stimulus package will help inject liquidity worth 10% of India’s GDP and will benefit industries, especially MSMEs, get back on their feet. It is a welcome move and is being widely accepted in a positive light. That being said, it is crucial to monitor the implementation of this economic stimulus package as it will help determine the future of India’s trade function and economic progress.