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Financial Support To Turn Around The Indian Economy

The fresh measures are expected to help sectors that have been the worst hit by the pandemic and the lockdown. Some of these measures are directed at infrastructure and construction projects, which, the government hopes will be expedited, to help create jobs.

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The festive season is traditionally when consumers go on a buying spree and stocks move off shelves and out of godowns, to give manufacturing industries that extra impetus. So the economy usually experiences a spurt in activity and a little more growth. Even though manufacturers are banking on that little extra uptick in sales, the Union government was obviously not taking any chances. 

Just before Diwali, the Centre came out with the third tranche of the economic packages it has announced since March to bolster up the Indian economy in the face of a slowdown made worse by a globe encompassing pandemic. The Union Finance Minister decided to give another nudge to a floundering economy to add to the festive cheer. Christening the new package Atmanirbhar Bharat 3.0, Finance Minister Nirmala Sitharaman said the economy was ‘seeing strong recovery’, and Covid-19 active cases were on the decline. 

The fresh measures are expected to help sectors that have been the worst hit by the pandemic and the lockdown. Some of these measures are directed at infrastructure and construction projects, which, the government hopes will be expedited, to help create jobs. The announcement came close on the heels of the Cabinet approval for the Production-Linked Incentive (PLI) scheme for ten sectors announced on 11 November, 2020. 

It goes without saying that industry expressed its gratitude and applauded the measures. “Income Tax relief for developers and home buyers will encourage transactions and attract first time home buyers. In addition to this, the infrastructure debt financing support announced by the government in the form of the Rs 6000 crore equity will attract more investments in infrastructure development. All these measures will collectively improve India’s competitiveness and will go a long way in boosting the initiative to build a ‘Self Reliant’ India,” said Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE.  

Niranjan Hiranandani, President, NAREDCO and Assocham, said the Finance Minister’s announcement of additional funding of Rs 18,000 crore for the PM Awaas Yojana-Urban would add more sparkle to the festive season. “This is over and above the Rs 8,000 crore already allotted this year, and will translate into more homes for home seekers, more employment opportunities, as also good business for suppliers and industries peripheral to real estate and construction,” said Hiranandani. 

The Production Linked Incentive scheme too found loud cheer from home-grown manufacturers. Rajesh Uttamchandani, Director, Syska Group said, “For a homegrown Fast Moving Electronic Goods Company like the Syska Group, this is a great initiative that will enable us to further develop solutions in-house and focus on domestic manufacturing and generating further employment opportunities.”

The Nay Sayers But there are some sceptics too. “These measures will boost both the formal and informal sectors. While the stressed sectors benefit from credit schemes, businesses that rely on close human interactions, such as travel and hospitality, are likely to remain depressed till the Covid -19 situation improves,” said Jaideep Ghosh, Chief Operating Officer at Shardul Amarchand Mangaldas & Co, a leading law firm. 

Or take the example of Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock brokers. “The announcement can potentially be negative for the financials if the government and the Reserve Bank of India resort to moral suasion or more direct measures to nudge banks towards accelerated lending to the pandemic impacted sectors,” Hajra cautioned. Could the proposed infusion of Rs 6,000 crore into the National Infrastructure and Investment Fund result in increased investment in the aviation sector? “Yes, it should,” said Shivpriya Nanda, Partner at J. Sagar Associates. “Aviation needs nearly $20 billion in the next five years and has suffered terribly due to the pandemic,” said Nanda. 

The facts will emerge over the ensuing months and the optimists could at best keep their fingers crossed.

ATMANIRBHAR 3.O HIGHLIGHTS (FIGURES IN RS CRORE)

  • 10,200 cr: Additional Outlay for Capital & Industrial Expenditure
  • 6,000 cr: Govt to Infuse as Equity in NIIF
  • 65,000 cr: Fertilizer Subsidy
  • 10,000 cr: Additional Outlay for PM-GKRY in FY21
  • ECLGS Extended till March 31, 2021
  • Entities with outstanding credit above Rs 50 cr and upto Rs 500 cr covered
  • Tax Relief for developers/home buyers for houses upto Rs 2 cr
  • Circle Rate: Raised to 20% from 10% for units upto Rs 2 cr and applicable till end-June 2021 in order to allow the sale and registration of housing units
  • Rs 18,000 cr: Additional Funds over BE for PMAY (Urban)
  • Credit Guarantee support for 26 stressed sectors
  • Performance Security on Infra/Construction Contracts now 3% vs 5-10 % earlier to be available for all dispute free projects
  • EMD Not Required for bid tenders; To be replaced by Bid Security Declaration. Relaxations will be applicable till 31 December, 2021.