20 Lakh Crore Atmanirbhar Bharat Package। Full Analysis

On May 12, 2020, at 20:20 PM, Prime Minister Narendra Modi announced a sum of 20 lakh crore as a relief package for the poor and migrant laborers.

This amount is 10% of the total 'gross domestic product' (GDP) of the country.  In which the poor, laborers, small traders as well as healthy related services are also mentioned.

Given the grandeur of this huge amount, it becomes mandatory to do a full analysis of it. Is the government really going to disburse such a huge amount of money.

Before proceeding further we need to pay special attention to two words.

• Monetary Policy
• Fiscal Policy

If you already know about this, then ignore it and proceed.

Monetary Policy

Monetary policy is the policy adopted by the RBI to control money supply in economy.

That is, RBI regulates the flow of currency by changing the Repo Rate and Reverse Repo Rate according to the demand of time and situation.

Repo Rate - It is the rate of interest at which central bank (RBI) lends short term money to banks to control credit availability, inflation and the economic growth.

Reverse Repo Rate - It is the rate of intrest at which central bank (RBI) borrowed money from commercial bank within the country.

Under this interest rate, the central bank (RBI) borrows from other commercial banks in the country.

RBI lowers the Repo Rate so that other banks can provide loans to people at a lower rate.  Interest rates rise as the repo rate increases.

Fiscal Policy

By fiscal policy government adjust it's spending level and tax rate to monitor and influence a nations economy.

Through fiscal policy, the government affects the economy of the country by operating revenue collection and expenditure and tax rates.

The central bank is an independent entity and the government cannot manipulate the decision taken by it.

According to the Prime Minister's speech, Finance Minister Nirmala Sitharaman gave full details of the package of 20 lakh crores in a five-day press conference.  Let us understand this in detail.

Atmanirbhar Bharat package

RBI Measures

The central bank RBI, decided to infuse Rs 8,01,603 crore into the economy through the Monetary Policy.  With this amount, the bank will be able to provide loans to people at a low interest rate.

With which MSME sector, small industries and traders will be able to recover the losses incurred in this corona period at the earliest. This will support the declining economy.

But here serious questions also arise on the government. Is it ethical to call the decision taken by RBI as part of its package?

RBI is an independent institution, it is not rational for the government to manipulate the RBI decision and include those decisions in its package.

Earlier Measure (1,92,800)

It comes under fiscal policy. This section details the amount of money spent during the Corona period (22 March 2020 - so far) before 12 May 2020.

After 22 March 2020, tax concessions led to a decrease of 7,800 crore in revenue.

About 15,000 crore was spent in Health Care.  In which an insurance amount of 50 lakhs for doctors was announced. 

Medical equipment (PPE kits, masks, labs, waitilters etc.) were arranged.

Pradhan Mantri Garib Kalyan Package - 1,70,000 crore, in which money was transferred directly to Jan Dhan account of farmers, workers, old and women.  

Ujwala scheme

Free grain

Free travel for migrant workers (85%)

Total amount: 7,800 + 15,000 + 1,70,000 = 1,92,800 crore.

The five-day press conference of Finance Minister Nirmala Sitharaman took note of various other aspects.

Day 1 - MSME Sectors, NBFCs, DISCOM, Tax declared for about Rs. 5,94,550 crore. This amount will be provided as a loan at a lower rate of interest.

The MSME Sector's 3 lakh crore loan will be guaranteed by the government so that they will not have to hold collaterals.

Day 2 - The second day was in the names of the poor, migrants and farmers.  3,10,000 crore was announced by the government.

Under this, the government will spend 3,500 crore to provide free food grains to the migrants for the next 2 months.

Day 3 - The government announced 1,50,000 crore in the agriculture sector.

Day 4 and 5 - The government announced 48,100 crores for the reform work.

In which 40,000 crores were kept for MNREGA.  In addition, the government announced about 60,000 crores in the MNREGA scheme in the 2020-21 budget.

Total amount of 40,000 + 60,000 = 1,00,000 crore allocated in MNREGA scheme.  By which the migrant laborers who are going towards the village can get work there so that their lifestyle will be restored.

It was expected that the government would transfer money directly into people's accounts so that their immediate needs could be met.

98-99% package is offered as a loan of some kind.  Somewhere the RBI money was added, some schemes and facilities already counted, and somewhere the huge grand 20 lakh crore package was created by incorporating only the public own money (TDS reduction 25%).

How much is the Real Fiscal Package

According to several important sources, this package is only between 1 - 2% of the gross domestic product (GDP), about 1 lakh crore - 2.7 lakh crore.

According to Barclays (England) the package is only 1.5 lakh crores.

Care Rating - 2.73 Lakh Crore

HSBC India - 2 lakh crores (1% of GDP)

Yogendra Yadav - 1.7 lakh crores

According to the demand of the time, the government should put money directly into the account of the poor.  He will definitely get relief from schemes like Pradhan Mantri Garib Kalyan Package, free grain distribution.  But this is not enough, the government should pay attention to this.

It is impossible to describe in words the way migrant laborers are facing difficulties in this lockout.

The heart-wrenching pictures surfacing in their struggle to reach their destination are evidence of the failures of the central and state governments.

6 -7 months pregnant women, and children are forced to walk hundreds of thousands of kilometers. Governments' negligence reflects insensitive attitude towards the poor migrants. This can results in serious consequences.

Free travel of migrant workers was also added to the package under which the central government will pay 85% and the state governments will pay 15%.  But in reality, migrants are seen walking on the roads. According to several media reports, passengers traveling by train paid their tickets themselves. That is, the announcement of free rail journey proved blank.

Lower class society is the most affected in times of calamity.  For this it is important that the government take them seriously and pay special attention. Labour and workers are the backbone of economy, without them economic development cannot be imagined.