Post #8 of Quarantine Series - A package for the Lower Strata

The Finance Minister announced the details of the second tranche of the special economic package with a focus on providing liquidity support to farmers, street vendors and food relief to the migrant workers. There were also announcements made for the mudra loanees, affordable housing sector and for employment generation for tribals. 

The total value of the economic package announced so far is Rs 16.04 lakh crs and thus the balance Rs 3.96 lakh crores will be announced subsequently in other tranches. 

Total liquidity infusion as per today’s package adds up to Rs 3.16 lakh crs, of which only Rs 5,000 crs will be an outflow from the Government. The balance liquidity measures will be undertaken by banks and other financial institutions.

Breakup of total value of the economic package is summarized below:

Announcements	Amount (Rs lakh crs)
PM Garib Kalyan Yojana	1.7
RBI	5.24
Athmanirbar 1.0 (May 13)	5.94
Athmanirbar 2.0 (May 14)	3.16
Total so far	16.04
Total package	20
To be announced	3.96

The breakup of the Athmanirbar economic package 2.0 announced today is detailed below:

Specific announcements	Amount (Rs crs)
Free food to  migrants	3,500
Interest subvention on Mudra loans	1,500
Credit line for street vendors	5,000
Credit Linked Subisidy Scheme for housing	70,000
Farmers refinance via NABARD	30,000
Kisan Credit Card	2,00,000
CAMPA funds	6,000
Total	3,16,000

The specific scheme wise announcements are detailed below:

1.       Migrants

a.       Free food grains supply to all migrants for the next 2 months 

·       Migrants who are non-ration card holders (neither NFSA nor state card) will be provided 5 kg of wheat or rice per person and 1 kg of chana per family per month for the next 2 months.

·       The government will spend Rs 3,500 crs for this in the next 2 months

·       The responsibility of the implementation, identification and distribution will be with the states.

·       The food supply of 5 kg wheat or rice to 80 crs poor people (As announced under the PM Garib Kalyan Yojana) will continue separately

What is the benefit: Based on the identification and implementation by the state governments, this will provide food relief to the migrants

Cost to the government: Rs 3,500 crs (assuming this is not a part of any budget scheme)

b.       National Portability of the Ration Cards – One Nation, One Ration Card: 

·       This scheme will enable migrant beneficiary to access public distribution system from any fair price shop in the country.

·       This means that if a migrant is a resident of Bihar and is working in Maharashtra, then he will be able to show his ration card at a fair price shop in Maharashtra and avail the food supply.

·       67 cr beneficiaries (83% of the PDS population) in 23 states will be covered by August 2020 while the balance will be covered by March 2021.

What is the benefit: This is medium and long term solution and at the moment no one will benefit from this scheme. So need to wait!

Cost to the government: Nil

c.    Affordable Rental Housing Complex for migrant workers: A scheme under the Pradhan Mantri Awas Yojana (PMAY) for migrant and urban poor will be launched to provide ease of living at affordable rents. This will be done by 3 ways:

§  converting government funded housing in the cities into Affordable Rental Housing Complexes

§  Incentivising manufacturing units/ industries to develop affordable rental housing complex on their private land

§  Also incentivising state government agencies/ central government organisations for the same

In simple terms this means the government is only encouraging various manufacturing units/ industries/ government agencies to convert any open land into affordable housing units.

What is the benefit: This is again a medium/long term solution with no immediate benefit. We need to wait for the specific details under this scheme.

Cost to the government: NIL

2.       Mudra Loans (only Shishu Loans)

a.       Interest subvention scheme for Mudra – Shishu loans – 

·       The Government will provide an interest subvention scheme of 2% for prompt payees for a period of 12 months after the 3 month moratorium period (extended by the RBI) is over.

·       Interest subvention is like a grant given by the Government on the loanees behalf to the banks. So if the interest outgo is Rs 10, Rs 8/- will be borne by the loanee and the  Rs 2/- by the government.

What is the benefit: Lower interest to be paid by these mudra-shishu loanees. The catch here is the word “prompt payees”. I am assuming everyone has been promptly paying.

Cost to the government: Rs 1,500 crs (estimated)

3.       Street Vendors

a.       Special credit facility for street vendors: 

·       The Government will launch a special working capital loan facility within 1 month of around Rs 5,000 crs for the street vendors.

·       The initial working capital of Rs 10,000/- per street vendor will be provided. This will benefit around 50 lakh street vendors.

·       The credit facility is likely to be extended by the banks/ financial instiutions.

What is the benefit: Liquidity support to the street vendors (estimated to be around 50 lakhs as per the FM) to restart their business activity. Need to check up with nearby “bhel-wala bhaiyaaji” if he will avail this working capital facility.

Cost to the government: Nil

4.       Affordable Housing

a.       Extension of Credit Linked Subsidy scheme (CLSS)- 

·       Let’s first understand what CLSS is: The CLSS is a scheme under the Pradhan Mantri Awas Yojana which provides interest subsidy to the home owners availing the loan facility under this scheme.

·       So, if you have an income between Rs 6 lakh and Rs 18 lakhs (consider yourself as Middle income person), then you can avail the loan from the financial institutions at a lower interest cost.

·       The differential interest (between actual interest – say 12% and the lower interest as per the scheme say 8%) will be borne by the government.

·       The government has already budgeted Rs 500 crs under this scheme.

·       This scheme for the middle income group  is to be extended till March 31, 2021 and this is likely to benefit 2.5 middle income families during FY21.

What is the benefit: Will provide interest benefit (3-4%) to those middle income families who want to purchase a new house/ renovations/ additions to the new houses and avail the loan under this scheme. For my friends, in case you want to purchase a house, you can avail this benefit.

What is the benefit of Rs 70,000 crs then? The government is expecting the loans to be taken by these middle income families which will help in building/ renovating houses. Therefore, they expect investment of Rs 70,000 crs in the housing sector and demand for various materials like steel, cements which will also generate employment.

Cost to the government: Already budgeted in FY21. So NIL.

5.        Employee creation for tribals

a.       CAMPA (Compensatory Afforestation Management and Planning Authority) funds to be utilised for employment generation: 

·       The government will approve plans worth Rs 6,000 crs which will help the state to utilise funds for various activities like afforestation and plantation work.

·       These are unutilised funds and the government will approve the various projects which will help in kick-starting these projects by utilising the unutilised funds. This in turn will help in job creation in the tribal areas.

What is the benefit: Employment generation for tribal community

Cost to the government: Nil

6.       Farmers

a.       Rs 30,000 crores – additional emergency working capital fund for the farmers through the NABARD: 

·       The NABARD will extend additional refinancing support of Rs 30,000 crs (over the current Rs 90,000 crs) to the farmers. This will benefit around 3 crore farmers.

·       NABARD will provide these funds to the various cooperative banks/ regional rural banks. This will help in on-lending this money to the farming community.

What is the benefit: Additional liquidity support to the farmers for undertaking post harvest (rabi) and current kharif requirements 

Cost to the government: Nil

b.      Rs 2 lakh crores concessional credit boost under Kisan Credit card- 

·   There will be a special drive to provide Rs 3 lakh crs of concessional credit to PM-KISAN beneficiaries through Kisan Credit Cards. This will also include fishermen and animal husbandry farmers and will benefit 2.5 crore families.

What is the benefit: The farmers can avail institutional credit at concessional rate and this additional support to the farming community.

Cost to the government: Nil