View from India: Special package for economic revival
The economy, which had become sluggish due to Covid-19, is gearing up for a revival. A special economic package has been created for the country’s recovery in the wake of the pandemic.
Prime Minister Narendra Modi has announced that the package is to the tune of Rs 20 lakh crore. As per media reports, this is equal to nearly 10 per cent of the country’s GDP. Finance Minister Nirmala Sitharaman had detailed various policies and liberalised measures through a series of five tranches, the last of which was announced on 17 May.
The economic package takes into account key sections of the economy such as migrant labourers, small vendors, farmers and micro, small and medium enterprises (MSMEs). Modi called the package 'Atmanirbhar Bharat Abhiyan', or Self-Reliant India Campaign. The campaign stresses the need for self reliance as during the pandemic the country has sustained itself with local produce. Logically, it’s time to give the local element a stimulus and make local products competitive in the international market, which also aligns with the Make in India vision.
In line with this, Sitharaman has scaled-up the foreign direct investment (FDI) limit in defence manufacturing from 49 per cent to 74 per cent. The decision is to promote indigenisation of defence manufacturing under the Make in India umbrella; there will be a list of weapons and platforms, which will be expanded every year, that cannot be imported.
As per the May 2020 CRISIL teleconference, 'A grinding halt and the grind ahead’, the Indian aviation industry– which employs over 7.5 million people – directly and indirectly contributed 1.5-2 per cent to the national GDP in 2018. Total passenger traffic was expected to increase at a rate of 2.5 per cent from 344.7 million in fiscal 2019 to 353.2 million in fiscal 2020. Despite the recent slowdown before the pandemic broke out, the sector was expected to revive in the next 9-12 months, with the heavy order book of airlines and government initiatives to boost the economy.
The Airports Authority of India and airport operators are expected to incur revenue losses of Rs 2,600 crore and Rs 2,700 crore respectively. Of all the stakeholders involved, the airlines are expected to bleed the most, accounting for as much as 70 per cent of the total potential revenue loss. However, once India's lockdown is lifted operations are expected to be gradually ramped up to 50-60 per cent of capacity by the year-end.
CRISIL has stressed the need for government support through support packages, tax exemptions and swift policy actions.
Steps will be taken to make the country a hub for Maintenance, Repair and Overhaul (MRO) of aircrafts. MRO will have an ecosystem that will take care of civil as well as defence aircrafts. MRO within the Indian shores will become robust with a favourable tax regime and, in the long run, it is expected to lower flying costs. The benefit is expected to be passed on to the passenger. In a further move, six more airports will be auctioned on public-private partnership basis.
Sitharaman also outlined a liberal geo-spatial data policy, through which private players can express their interest opportunities in space exploration. The policy will also help assist tech entrepreneurs with remote-sensing data. With a predictable policy and regulatory environment, private companies will be able to scale-up their capacities by using the facilities offered by the Government of India’s primary space agency, Indian Space Research Organisation.
Atomic energy reforms were also announced, with details on how research reactors for medical isotopes are being encourage to make affordable cancer drugs using the public-private partnership model. The same model will be leveraged for irradiation technology for food preservation to complement agricultural reforms and enable farmers with better irrigation facilities.
It’s likely to be a field day for farmers. A fund of Rs 1 lakh crore has been unveiled to build the necessary infrastructure and raise productivity to make the farming sector competitive in the global market. There are also efforts towards strengthening the farmer-market relation, whereby farmers can sell directly to consumers – a legal framework will provide price assurance to farmers and help improve the yield.
There have been several instances of power cuts, which tend to happen in summer months. To address this challenge, a decision has been taken to privatise distribution companies – 'discoms' – in metros. Discom operations will be streamlined to do away with inefficiencies. Penal action will be taken against load shedding.
The coal sector is set for an overhaul with the introduction of competition, transparency and private sector participation in the sector. The closely confined state monopoly of coal mining is now commercially thrown open to private investments, with around 50 blocks being offered for bidding. The government will invest Rs 50,000 crore for building evacuation infrastructure.
The budget estimate for MNREGA was Rs 61,000 crore, but now an additional Rs 40,000 crore has been allocated. MGNREGA, or Mahatma Gandhi National Rural Employment Guarantee Act, is India’s flagship rural jobs guarantee programme. Under MGNREGA, migrant workers will get food and sustenance for two months.
MSMEs can look forward to schemes worth Rs 5.94 lakh crore, with Rs 3 lakh crore of credit guarantees for the sector being taken into account. Given the grimness of the situation, GoI will have no fresh insolvency proceedings for one year.
On the education front, the country is preparing to launch One Nation One Digital Education and One Class One Channel programmes. The Prime Minister's e-vidya programme for multi-mode access to digital/online education will also be launched. E-content will be made available for visually and hearing-impaired children. DIKSHA for digital school education in states and union territories and one earmarked TV channel per class are part of the offering. DIKSHA, an initiative from the Ministry of Human Resources Development, is a National Digital Infrastructure for Teachers which equips teachers with advanced digital technology.
The coronavirus pandemic has brought a message and an opportunity; a conviction shared by Narendra Modi in his address to the nation. “As a nation today we stand at a very crucial juncture; such a big disaster is a signal for India. It has brought a message and an opportunity. We need now to build an Atma Nirbhar Bharat,” said Sitharaman, quoting the Prime Minister.
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