In a set of measures to mitigate the economic impact of the devastating second Covid wave, Finance Minister Nirmala Sitharaman announced a series of steps aimed to push credit off-take in priority areas such as health-infrastructure and the severely hit tourism sector by providing interest-rate concessions. This is the fourth such package being announced by the government since last year to provide relief to individuals and enterprises, and boost the economy in the wake of the Covid-19 pandemic.
The government pegged the total financial implications of the package, which included the reiteration of some steps that were already announced, such as the provision of foodgrains to the poor till November and higher fertilizer subsidies, at ₹•6,28,993 crore.
The government raised the total corpus of Emergency Credit Line Guarantee Scheme (ECLGS) from ₹3 lakh crore to ₹4.5 lakh crore. The ₹3-lakh-crore ECLGS was one of the key components of the ₹20-lakh-crore economic stimulus package announced last May that offered additional working capital finance in the form of an easy term loan to small firms.
The finance Minister launched a new ₹1.1 lakh crore loan guarantee scheme for Covid affected sectors with ₹50,000 crore dedicated to improving health infrastructure in nonmetropolitan cities at a maximum interest rate of 7.95% compared to prevailing interest rates of 10-11%. The balance 60,000 crore is fund is meant for other sectors, with the interest rate capped at 8.25% per annum.
A separate ₹•23,220 crore has been allocated for public health with a focus on paediatric care, which will also be utilised for increasing ICU beds, oxygen supply and augmenting medical care professionals for the short term by recruiting final year students and interns.
In another credit guarantee scheme, the government offered to facilitate credit flow to 25 lakh borrowers of micro finance institutions. The FM said that the government would provide a guarantee to scheduled commercial banks for loans to NBFCs-MFIs for on lending up to Rs 1.25 lakh each to 25 lakh small borrowers.
An ongoing scheme – the Atmanirbhar Bharat Rozgar Yojana – has also been extended from June 30, 2021 to March 31, 2022. The scheme was launched in October 2020 to incentivise employers to create new jobs. The scheme is implemented through the Employees Provident Fund Organisation (EPFO), with the government sharing part of the financial burden of the employers as an incentive to hire more workers.
The stimulus also provided for an additional ₹14,775 crore for nutrient-based subsidy to farmers, the finance minister said. The amount includes, ₹9,125 crore additional subsidy for DAP (di-ammonium phosphate) and ₹5,650 crore additional subsidy for NPK (nitrogen, phosphorus, and potassium) based complex fertilizer.
The stimulus package also extended the Pradhan Mantri Gareeb Kalyan Anna Yojana (PMGKAY) which provides 5 kg food grain to the poor, up to November. Announced last month, the extension has a financial implication of ₹93,869 cr. It was first launched on March 26, 2020 and the total cost of the scheme in 2020-21 was ₹133,972 crore.
Loans would also be provided from the corpus to both tourism companies and recognised tourist guides. In order to boost tourism, on request of the industry, the government has allowed free tourist visa to 5 lakh tourists up to March 31, 2022. Under new Loan Guarantee Scheme for COVID-affected sectors, working capital/personal loans will be provided to people in tourism sector to discharge liabilities and restart businesses impacted due to COVID-19 pandemic. The scheme will cover 10,700 Regional Level Tourist Guides recognised by Ministry of Tourism and Tourist Guides recognised by the State Governments; and about 1,000 Travel and Tourism Stakeholders (TTS) recognized by Ministry of Tourism. TTS’s will be eligible to get a loan upto Rs. 10 lakh each while tourist guides can avail loan upto Rs 1 lakh each. There will be no processing charges, waiver of foreclosure/prepayment charges and no requirement of additional collateral.
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