The Centre, in the fifth and final tranche of its Rs 20 lakh crore economic package, on Sunday increased the borrowing limit of the states from 3% to 5% and announced that Rs 40,000 crore will be spent additionally under the Mahatma Gandhi National Rural Employment Guarantee Act.
Finance Minister Nirmala Sitharaman made seven announcements as part of a slew of measures to kickstart the economy. This announcements included the allocations under the MGNREGA scheme, heath (rural and urban), education, businesses and Covid-19, decriminalisation of Companies Act, ease of doing business and private sector and state governments.
The Centre claims that it is a Rs 20 lakh crore economic package, equivalent to 10% of India’s GDP, though analysts have pointed out that a significant portion of that amount includes measures earlier announced, efforts by the Reserve Bank of India and calculations that assume economic activity even though the government’s actual expenditure is far smaller than the stated amount.
The finance minister said the Centre has decided to allocate an additional Rs 40,000 crore to the MGNREGA scheme, in addition to the budget estimate of Rs 61,000 crore, to ensure that workers returning to villages are provided employment, especially through the upcoming monsoon period. “A lot of workers have gone back to their villages, this will ensure that those wishing to enroll into MGNREGA can be provided jobs,” she added.
Sitharaman said the public expenditure on health will be increased, without specifying any outlay. She added that the investments in grass-root level will be also ramped up in terms of both clinics and wellness centres. The emphasis will be on hospitals and labs, both private and publicly funded, the minister said.
The Centre also stated that infectious diseases block will be built in all district hospitals, adding that public health labs will be built at block levels to address the inadequacy.
“We have already announced Rs 15,000 crore to be spent for health related measures to tackle Covid-19,” the finance minister said. “Insurance cover of Rs 50 lakh per person for health professionals was announced.”
Education during Covid-19
The government said the country’s top 100 universities will be automatically allowed to start online courses by May 30 as part of the Prime Minister’s e-vidya programme. Sitharaman said one nation, one digital platform for school education will also be launched. This will include extensive use of radio and podcasts and special e-content will be generated for visually and hearing impaired children. “200 textbooks have been added to e-Pathshaala,” said the finance minister.
An initiative for psychological support of students, teachers and families called “Manodarpan” is also being launched immediately.
Decriminalising the Companies Act
Sitharaman also said the government will soon move an ordinance to decriminalise Companies Act violations involving minor technical and procedural defaults. The Centre has decided to drop seven compoundable offences, while five others will be dealt with under an alternative framework.
The violations that will be decriminalised include minor technical and procedural defaults like shortcomings in corporate social responsibility reporting, inadequacies in board report, filing defaults and delay in holding an annual general meeting.
“Majority of the compoundable offences sections to be shifted to internal adjudication mechanism,” the government said, adding that the amendments will de-clog the criminal courts and the National Company Law Tribunal.
Business and Covid-19
In a bid to give relief to companies defaulting on loans due to the coronavirus pandemic, Sitharaman said no fresh insolvency will be initiated for one year under the Insolvency and Bankruptcy Code. Meanwhile, coronavirus-related debt will also be excluded from definition of default, she added.
The minimum threshold to initiate insolvency proceeding has been raised to Rs 1 crore from Rs 1 lakh to benefit the micro, small and medium enterprises. An ordinance will be promulgated to bring these changes once Parliament is in session.
She also said that government will permit companies to directly list their securities in permissible foreign jurisdictions. Private companies which list non-convertible debentures on stock exchanges will not classify companies as listed companies, Sitharaman added.
Public sector policy
The Narendra Modi-government also announced that it would privatise state-run companies in non-strategic sectors, as the economy grapples with a coronavirus-induced standstill.
A list of strategic sectors will also be announced in which only one to four public sector enterprises will remain, Sitharaman said, adding that a new “coherent” public sector enterprises policy will be formulated.
“To minimise wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatised/merged/brought under holding companies,” she added. “All sectors will be open to private sectors also. Public sectors will continue to play an important role in defined areas.”
Centre extending support to states
The Centre also decided to accede to the request and increase borrowing limits of the states from 3% to 5% for 2020-’21 only. The finance minister said this will give the states extra resources of Rs 4.28 lakh crore.
“We completely recognise that like the Centre, states too are facing a sharp decline in their revenues,” she said. “We have been consistently extending needed support to states, since they are at the front end of fighting the coronavirus.”
This came at a time when states have been struggling to contain the coronavirus outbreak. The government also increased the advance limits for states by 60%. The number of days a state can stay in continuous overdraft days has been increased from 14 days to 21 days and from 32 to 51 days quarterly, Sitharaman announced.
She added that government has also asked the Reserve Bank to increase the advance limits for states by 60%.
However, the borrowing will be linked to specific reforms. “There will be unconditional increase of 0.50 per cent in borrowing,” Sitharaman said. “1% in 4 tranches of 0.25 per cent with each tranche linked to clearly specified, measurable and feasible reforms. “Further 0.50% if milestones are achieved in at least three out of four reforms areas.”