Blessing or Hoax?

1. 20 Lakh Crore Stimulus Package….

2. Deciphering
INR 20-lakh crore
economic
stimulus package
Made By:
Abdul Basit Momin
MBA – International Business
Amity Business School.

3. Executive Summary
• Due to the COVID-19 pandemic, India’s economy trembled and is in a
very bad shape even might face a recession.
• To avoid it, On 12th May 2020, at 20:20hours our PM Modiji announced
an economic stimulus package of INR20 lakh crore, which is 10% of our
GDP.
• Objectives of this package are, to boost economy, promote vocal for
local, and make India – A self reliant country.
• This stimulus package is more like a relief package to the Indians.
• When the package was announced a great hype was created amongst the
Indian’s, even Nifty hiked up by 200points.
• But on the later days, when our finance minister explained the various
tranches, the nifty fell terribly. The stock market sentiment matters a lot
because it shows the overall sentiments/perspective of the country
people in general.
• There are various parts in this whole package, let’s get some details and
important insights about it.
Date Nifty
12th May 2020 9196
13th May 2020 9386
14th May 2020 9142
15th May 2020 9136
18th May 2020 8806

4. Before starting, let’s have some initial points:
• Ministry of finance and RBI controls the economy of India.
• Ministry of Finance uses fiscal policies, focusing on taxes and spending.
• RBI – apex bank of India uses monetary policy tools like CRR, SLR, Interest rate, Repo rate, Reverse
Repo Rate.
• Lockdown due to COVID-19, resulted in loss of income, savings and jobs.
• Growth of economy is dependent on consumption and consumer spending.
• Indian population is categorized into
1. Higher Income Group (HIG)
2. Middle Income Group (MIG)
3. Lower Income Group (LIG)
4. Economically Weaker Sector (EWS)
** The welfare schemes by government are only for the LIG and EWS **

5. Breakdown of the INR20 lakh crore package:
Installments Coverage INR in crore
Tranche 1 MSME 5,94,550
Tranche 2 Migrant Workers, street
vendors
3,10,000
Tranche 3 Agriculture and allied
sectors
1,50,000
Tranche 4 & 5
(Reforms and Enablers)
Coal, minerals, Defense
production, etc.
48,100
Earlier announced Fiscal Tax concession,
Healthcare, PMGKY
1,92,800
Monetary Aid Measures by RBI 8,01,603
Total 20,97,053

6. Monetary Aid
• Measures taken by the Indian apex bank, RBI.
• It includes all the liquidity and credit related measures.
• CRR, Repo rate and Reverse Repo rate were decreased due to which the
interest rate got down so that the public can take more loan easily at
attractive interest rates.
• Some liquidity options like, SLF-MF: Special Liquidity Facility for
Mutual Funds of around INR50000 crore was also introduced.
• More such measures were taken which sums up to INR8,01,603 crore.

7. Earlier Announced Fiscal Measures
• It includes all the revenue lost due to the tax concessions provided since 22nd March 2020,
i.e. the Covid-19 lockdown. The sum is around INR7,800 crore.
• It also includes PM’s Healthcare package, which constituted the financial aid provided to
the states for essential items, financial aid for the testing kits and the labs, insurance cover
of INR50 lakhs for the health professionals, etc. The total sum is around INR15,000 crore.
• PMGKY – direct transfer of funds ranging from INR500 – INR2000 per head to Jandhan
accounts, farmers, women, old age people, workers, depending on the category they fall in.
The PMGKY also provided free LPG cylinders under Ujvala Yojana Cylinders, and even
free food grains was given. Total cost INR1,70,000 crore.
• Free travel for migrants was arranged in which amidst of COVID-19 the migrants were
travelling to their native in which 85% cost of travel was taken care by the central
government.
• These all sums up to INR1,92,800 crore.

8. T
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E
1
Particular Amount (crore)
Emergency Working Capital for MSMEs- Special loans in which no collateral is required.
The whole guarantee coverage would be done by Indian Government.
3,00,000
Sub-ordinate Debt for Stressed MSMEs- Businesses on the verge of bankruptcy or force-
closure.
20,000
Fund of Fund for Growth MSMEs- Government will provide equity infusion depending on
the growth potential.
50,000
EPF Support – Especially for those having salary of INR15,000pm or less whole EPF
support would be provided.
2,800
Reduction in EPF rates – EPF rate improvised from 12% to 10% for both employee and
employer.
6,750
SLF – NBFC/HFC/MFIs - Debt papers of these organizations would be purchased by the
Government, boosting the liquid infusion in this sector.
30,000
Partial Credit Guarantee Scheme for Liabilities of NBFCs/MFIs – First 20% losses due to the
default or bad debt would be on Government.
45,000
Liquidity Injection for DISCOMs- Power Distribution Companies have long receivables due
because the consumers didn’t pay the bills. Against these receivables the Power Finance
Corporation and REC are asked to provide loans to the companies
90,000
Reduction in TDS/TCS Rates – A 25% off would be there on the existing rate of interests. 50000

9. T
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1
Some other measures :
• MSME Definition Change
• Only Domestic Companies are allowed for the Govt. Tenders of value less than
INR200 crores.
• Reforming 44 Labor Laws to 4 Uniform Codes.
• Contractors are given time extension up to 6 months by Central Agencies to complete
the tasks.
• Contractors are also given provision of partial release of Bank Guarantee.
• Regulatory authorities were asked to extend the completion date of real estate projects
under RERA so as to de-stress developers.
• The total sum for this tranche is INR5,94,550 crore.
Business Investment Turnover
Micro Less than INR1 crore Less Than INR5 crore
Small INR1-10 crore INR5 – 50 crore
Medium INR10 – 20 crore INR50 – 100 crore

10. T
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Particular Amount (crore)
Free Food grains to Migrants – For 2 months, additional food grains would be given to the
migrants for free.
3,500
Interest Subvention for MUDRA Shishu Loans – A considerable time extension would be
given for the payment on the interest for the small amount loans which are up to INR50,000
1,500
Special Credit Facility for Street Vendors- A special loan scheme for the street vendors. The
loan amount would be up to INR10,000.
5,000
Housing Credit Linked Subsidy Scheme for MIG – Already existing scheme which is just
renewed up till 31st March 2021 to boost housing. It works on may-may be basis.
70,000
Additional Working Capital through NABARD – Farmers are given provision of applying for
additional loan.
30,000
Additional Credit through KISAN CREDIT CARD 2,00,0000

11. T
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2
One Nation One Ration Card
Affordable Rental Housing Scheme for Poor and Migrants
• Hassle free delivery of subsidized food-grains to all
migratory beneficiaries anywhere in the country through
‘nation-wide portability’ under NFSA
• A migrant or poor can avail the same subsidized benefits in
any state in India.
• Ministry of Housing & Urban Affairs has initiated Affordable Rental Housing
Complexes (ARHCs), a sub-scheme under Pradhan Mantri AWAS Yojana- Urban
(PMAY-U).
• Housing scheme for the migrant workers.
• For proper and hygienic stay.
• The total sum for this tranche is INR3,10,000 crore.

12. T
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Particular Amount (crore)
Micro Food Enterprises – Transforming the unorganized sector by the use of technology,
branding, marketing, promotion, etc.
10,000
PM Matsya Sampada Yojana – To fill the gaps in fisheries sector. 20,000
TOP to Total : Operation Greens – TOP means Tomato, Onion and Potato, special facilities
were introduced for the production and transport of all the vegetables and not only TOP.
500
Agri Infrastructure Fund – Aims for providing infrastructural support for the promotion of
Agriculture.
1,00,000
Animal Husbandry Infra Fund – Aims for providing infrastructural support for dairy
processing unit and cattle feed
15,000
Promotion of Herbal Cultivation – Promotion of medicinal plants, land to use up to 10lakh
hector.
4,000
Beekeeping Initiatives 500
• The total sum for this tranche is INR1,50,000 crore.

13. T
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Particular Amount (crore)
Viability Gap Funding (Social Infra) – Now the Government stake would be 30% instead of
20%
8,100
Additional MGNREGS allocation – Existing INR61,000 crore are buffed with more funds, to
provide sufficient jobs and stability to the migrants.
40,000
• The total sum for this tranche is INR48,100 crore.
4-5
Support to State Government :
• Net Borrowing increased from 3% to 5% of Gross State Domestic Product.
• Increased limit to be released in tranches as reform milestones are achieved.

14. My Opinion:
According to me the whole package will just put more pressure on us. The package is
designed in such a way that it looks great from the outside but when you go in detail and check the
facts you understand that its just more debt and nothing else.
Agriculture is the backbone of Indian economy, but the government is not providing sufficient
direct aid to them. What this package is giving to farmer is the new debts to clear their old debts.
Even there is no clear picture on how much the actual amount is allotted by the government. The
real amount to be used is still blurred by our Finance Minister by giving us big numbers in general.
The entire package has also failed to address the problems of state governments who are in the
frontline of the fight against COVID-19. Even when announcements were made about increasing
their borrowing limits with conditions, no commitment was made to pay the GST compensation
owed to states.
Going by the breakdown available in some of the releases of the Press Information Bureau, and
also estimates made by various commentators, the government will not be spending more than 2
lakh crores rupees. This is far from the 10 per cent of GDP claim. It would be just around 1
percent. Even going by the highest estimate of 4.2 crores, it would be just a bit over 2 percent of
GDP - among the lowest cost to government expenditures in any Covid relief packages in the
world.
Hence, this INR20 lakh crore package is a HOAX.