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Package worth Rs 20,97,053 crore completed with empowerment of states

Sitharaman detailed the final tranche of Modi’s promised package, allowing states to raise their borrowing limit from 3% to 5% of the GSDP

Finance Minister Nirmala Sitharaman today presented the final tranche of the economy-boosting package promised by Prime Minister Narendra Modi, also summarising the break-up of the sum. It totals to more than the sum the prime minister had promised: Rs 20,97,053 crore.

This amount, the prime minister had said on 12 May, would help build an “Atmanirbhar Bharat (self-reliant India)”.

Finance Minister Sitharaman, presenting the fifth tranche of the mega package, including measures worth Rs 8.1 lakh crore taken by the Reserve Bank of India, announced the centre’s support for states to allow them to raise their borrowing limit from 3% to 5% of the Gross State Domestic Product (GSDP). This translates to an additional borrowing capacity of Rs 4.28 lakh crore.

The Centre has put a rider on the increased borrowing space, though. Only 0.5% of the GSDP is an unconditional increase. The rest 1% is divided into four tranches of 0.25% each, with each tranche linked to the state’s expenditure on the ‘One Nation One Ration’, urban local body revenues, power distribution and reforms for the ease of doing business. The Centre will permit the final 0.5% if the states meet at least three out of four targets.

Sitharaman shared with reporters that states had so far borrowed only 14% of the authorised limit. They have not used 86% of the authorised borrowing.

The states had been asking for greater fiscal headroom to tide over the crisis triggered by the coronavirus epidemic.

The union government may need to amend the FRBM Act to enable this relaxation in borrowing limits.

Sitharaman recalled that her government had already given revenue deficit grants worth Rs 12,390 crore to states on time in April and May in spite of the Centre’s stressed resources. The Centre gave Rs 11,092 crore as advance release to states under SDRF in the first week of April while it gave Rs 4,113 crore through the Ministry of Health for direct anti-COVID activities.

The finance minister said the government devolved taxes worth Rs 46,038 crore in April while increasing Ways & Means Advance limits of states by 60% before that.

Sitharaman said the government would open all sectors to the private sector. This will include strategic sectors. To go with these reforms, the Narendra Modi government will unveil a new coherent policy in this regard, which will notify the list of strategic sectors requiring the presence of at least one state-owned company along with the presence of the private sector.

In all other sectors, the government will privatise PSUs, depending upon the feasibility. It is expected that the number of enterprises in strategic sectors will be between only one and four. The government will privatise or merge or bring under holding company structure the rest.

Sitharaman said that her previous budgets had set the direction for these announcements. In the Union Budget 2019-20 she presented on 5 July 2019, she had shared the government’s intent to reduce its stake in non-financial public sector enterprises to below 51% on the merit of every case. “Government is considering, in case where the undertaking is still to be retained in Government control, to go below 51% to an appropriate level on case to case basis. Government has also decided to modify the present policy of retaining 51% Government stake to retaining 51% stake inclusive of the stake of Government controlled institutions,” she had said on 5 July 2019.

The finance minister had also emphasised the need for strategic sales and consolidation of PSUs in the non-financial space. “Strategic disinvestment of select CPSEs would continue to remain a priority of this Government. In view of current macro-economic parameters, the Government would not only re-initiate the process of strategic disinvestment of Air India but would offer more CPSEs for strategic participation by the private sector,” she had said.

The government has initiated the privatisation of large public sector undertakings like BPCL, Air India, Container Corporation of India and Shipping Corporation of India. The Budget 2020-21 had estimated that the government would raise Rs 2.1 lakh crore through stake sales next year. This included plans to sell a portion of the union government’s stakes in Life Insurance Corporation (LIC) through an initial public offer (IPO), and sale of equity in the IDBI Bank to private, retail and institutional investors.

Further, the government had proposed in March this year changes in the Companies Act, 2013, which would enable Indian companies to list securities directly on overseas stock exchanges. The government may now notify these changes to allow start-up companies to list abroad without having to first list on Indian stock exchanges.

Sitharaman: 1st tranche from package for ‘Atmanirbhar Bharat’

The finance minister had unveiled the first tranche worth Rs 5,94,550 crore last Wednesday with announcements of major measures such as loan guarantees worth Rs 4.5 lakh crore to help micro, small and medium enterprises (MSME), non-banking financial companies (NBFC) and power distribution firms get collateral-free loans from banks.

The same day, Sitharaman announced measures related to provident fund (PF), which led to a hike in take-home salaries of employees across the board.

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Stimulus: 2nd tranche from PM’s package

As a part of the second part of the overall package, worth Rs 3,10,000 crore, the government had on Thursday said it would provide millions of migrant workers free foodgrains for the next two months. Rs 3,500 crore will be spent on food for nearly eight crore migrant workers, Finance Minister Nirmala Sitharaman said.

The 14 May announcements focused on migrant workers, street vendors and small farmers. This included extra ration, a universal ration card that would work across the country and affordable rental housing scheme.

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Stimulus: 3rd tranche worth Rs 1.5 lakh crore

The Friday announcement was historic. It freed farmers of state rules that had stopped them from acting like businessmen for more than seven decades of independence. In the third tranche worth Rs 1,50,000 crore, Sitharaman declared a fund Rs 1 lakh crore to strengthen farm-gate infrastructure and aggregators like Farmers’ Producers Organisation, agricultural entrepreneurs and primary agriculture cooperative societies. Rs 20,000 crores will be made available for fishermen through the Pradhan Mantri Matsya Sampada Yojana.

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4th and 5th tranches total Rs 48,100 crore

Yesterday’s announcements were about reforms in eight sectors in the fourth part of the more than Rs 20 lakh crore package. Among the centre’s big-ticket reforms on 16 May were a 25% increase in FDI in the defence sector and removal of the government monopoly on coal mining.

The government also proposed easing of restrictions on Indian airspace.

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Today, Sitharaman pushed spending on the MNREGA, increased the borrowing limit of states, relaxed rules for the private sector and made big changes for health and education sectors, totalling an expenditure of Rs 48,100 crore.

VS Philip

By VS Philip

Retired government servant and citizen journalist