Aatmanirbhar Bharat: Prime Minister Narendra Modi announced a Rs. 20 trillion (USD 265 billion) reliefcum-stimulus package, equal to 10% of the GDP, aiminga quantum jump of the economy and not just an incremental change.
Finance Minister Nirmala Sitharaman announced relief measures in five tranches, which are not very effective due to various reasons. The government should take stock of the extremely critical situation for which long-term measuresneed to be taken. Say NBFC/HFCs are in need of long-termfinance to sustain their loans to a host of borrowers – farmers,small traders, self-employed, small businesses, MSMEs, contractors, housing sectors and home buyers. They need moratorium for three years at least and fresh fund to meet the urgent requirements resulting from slow economicgrowth. This is needed to save people whose economic andsocial situations are badly affected, who are starving anddesperate for some income. The three months’ moratorium,now extended by another three months till end-August, onterm loan repayments has created a significant drain on theliquidity of the NBFCs. It will significantly decline theircash flow while NBFCs need to meet their obligations torepay their lenders. Banks should be encouraged to takemore exposure. Moody’s Indian Ratings are of this view.
For a “Self-reliant Bharat”, Finance Minister Nirmala Sitharaman has announced Jai Kisan mega measures for growth of agriculture and relief to farmers. These include:i) Sell produce freely inter-state. ii) Cereals, edible oils,oil seeds, pulses, onions and potatoes to be out of the
list essential commodities. iii) Create framework for remunerative agri-produce price. iv) Facilitate `1000 crore finance facility to develop micro food enterprises for promoting local agri products. v) Allocate funds for : a) Development of ` 20000 crore for fishing, b) ` 15000
crore for animal husbandry infrastructure, c) ` 4000 crore for herbal cultivation, d) ` 500 crore for bee-keeping andsupply chain for vegetables and fruits. vi) Have NationalAnimal Disease Control Programme. vii) Have legalframework for farmers’ redressing their grievance. viii)Provide additional refinance support from NABARD forcrop loan requirement of rural co-operative banks andRRBs benefitting small and marginal farmers.
Migrant labourers: Migrant labourers should have been allowed, immediately after lockdown, to return to their homes by road and rail, freely by making use of thousands of central and state governments’ idle buses. Even armyshould be given this task to mitigate hardship of workerswho have been passing through inhuman conditionswith their children and other family members. Therehave been heart-wrenching reports of migrants and their family members dying of hunger or road accidents. Sixteen of them were run over by a goods train whilesleeping on the rail tracks.
Now, the government has announced to use their ration cards at any fair price shops. Card holders of the National Food Security Act or any state government will be given 5 kg of grain and 1 kg of pulses per family freely for the next three months. This is very meagre quantity.
Do they have money? They left place of work suddenly without getting payments.
Low Cost Housing: ` 70000 crore investment in housing for the middle-income group and affordable rental housingcomplex via PPP model has been proposed.
MSME sectors: The Finance Minister has proposed certain steps: i) ` 3 lakh crore collateral-free automatic loans forbusinesses including MSMEs. ii) ` 20000 crore subordinate
debt for NPAs & stressed assets. iii) ` 50000 crore equity infusion. iv) ` 9250 crore EPF support and reduction in EPF for three months. v) Partial credit guarantee scheme
for ` 45000 crore for NBFCs. vi) Global parties cannot participate in government procurements of tenders up to ` 200 crore.
Steps announced for NBFCs: i) ` 30000 crore special liquidity scheme for NBFC/ HFCs/ MFIs. ii) Special Liquidity Scheme iii) Partial Credit Guarantee Scheme. iv) To buy ` 3000 crore of papers from NBFCs as announced on May 14.
NBFCs want long-term guarantee for loans and bonds as they have to resume repayments from their wide range of customers who are affected by the present economic crisis. There is nervousness in the market. It is difficult to raise money from secondary market. The NBFCs need a package of ` 75000 crore for three years.
Agriculture: All mega measures for agriculture should be taken as part of MGNREGA. There’s a need for a proactive and constant agri-export strategy. Bharat has to become a reliable, regular, reputed supplier of agriproducts in the global market. It will be of great relief to farmers if they get the freedom to link directly to the markets. Creating an infrastructure for animal husbandry will boost milk production, employment, the rural economy and much more. It will also provide nutrients to children. Providing milk to children in the schools needs to be introduced so that farmers need not sell milk below cost price or at a throwaway rate.
Experts say that India’s GDP has already suffered a loss of ` 15-18 lakh crore. This stimulus will have a direct impact of ` 2 lakh crore on FY21 fiscal deficit.
Fitch, along with other rating agencies and economists, is of the view that most of the schemes announced under Aatmanirbhar Bharat Abhiyaan have a medium to long term focus and thus are not in a position to address the immediate concerns of the economy.The actual impact of the additional stimulus is only about 1% of GDP as opposed to the claim of 10%.
Wealth creators and generators are of the view that specific needs for survival have not been considered. Hospitality, aviation, and the health sectors’ revenues have become negligible.
To boost demand and the survival of critical sectors, the GST rates need to be reduced drastically so the total cost matches the money in the hand of the common people. To realise the Prime Minister’s vision for India’s ‘selfreliance’, the government has to give moratorium of three years and additional funds to all sectors - the industries, the service sector, hospitality, health, aviation, realty, infrastructure and NBFCs, HFCs on priority. Some economists suggest for monetising, printing more money and selling dollar from forex reserve, which has been swelling due to the lower price of oil despite lower export. So far, funds have been provided to high rated NBFCs who do not have stressed liquidity flow.
To conclude, the government’s relief measures need to be implemented urgently. It is a big task. How and from where will the funds be released? Procedures will itself take months together. Bureaucrats and officials will be shy to implement these. Only few have influence and will benefit. All ministers at the centre and the states should fix two hours to meet freely all classes of people. Even emperors, kings, the former Prime Minister late Atal Bihari Vajpayee used to meet in open darbar and hear people either one-to-one or in groups, the wealth creators and generators of all states. Bharat has laws for everything and government’s babus and officials tend to interpret these in a number of ways.
Financial wizards say that government should monetise, print money, borrow and invest in rural, social infrastructure, creating employment. Vital steps are needed to utilise the existing capacity to the full. Don’t create capacity where there is already unutilised capacity, don’t build monuments and extravagant unproductive government buildings, cut government’s unnecessary expenses by 25% at least.
Banks need to extend more credit and restructure debts depending on future cash flows without fear. The government should be guided by correct perceptions, granting immunity to key decision makers and not going for witch hunts.
Suspension of insolvency proceedings for a year is not considered as beneficial. Banks/Financial Institutions should be advised to desist to start insolvency proceedings without exhausting means of structuring and/or extending moratorium. If promoters cannot pay other creditors and settle with them, then insolvency proceeding is the only solution.
World: Due to the Covid-19 pandemic, the global economy may shrink by USD8.81 trillion as reported by the Asian Development Bank (ADB). This is equivalent to 9.7% of global GDP.
Let Bharat Mata give light to Bharatwasi to overcome this great twin crisis of slowdown economy & python Covid-19.
Dr. H.P. Kanoria
Editor in chief
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