The Union Finance Minister has recently unveiled the last set of financial measures under the Atmanirbhar Bharat Abhiyan. These strategies are designed to provide employment, support businesses and state governments, along with bolstering sectors like health and education. The measures form part of the Rs. 20 lakh crore economic stimulus package aimed at mitigating the effects of the Covid-19 pandemic.
Increased Allocation for MGNREGA
An additional Rs.40,000 crore is to be allocated under the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA). This move is expected to generate roughly 300 crore person days in total, particularly targeting returning migrants who are in urgent need of work due to the pandemic and lockdown. Additional benefits include the creation of a larger number of durable and livelihood assets which will likely stimulate the rural economy through increased production.
Health Reforms and Initiatives
The government has also announced an increase in public expenditure on health, targeting grass-root health institutions and improving health and wellness centres in both urban and rural areas. Furthermore, plans have been made to prepare India for future pandemics, such as implementing the National Digital Health Blueprint under the National Digital Health Mission (NDHM) and setting up of Infectious Diseases Hospital Blocks in all districts.
Promotion of Technology Driven Education with Equity
Initiatives such as PM eVIDYA are to be launched, providing multi-mode access to digital/online education across the nation. This consists of DIKSHA for school education, one dedicated TV channel per class from grades 1 to 12, and extensive use of radio and podcasts for educational purposes. Special e-content for visually and hearing impaired students will also be provided.
Measures Related to IBC and the Companies Act
The minimum threshold to initiate insolvency proceedings has been raised to Rs.1 crore, providing significant insulation for Micro, Small and Medium Enterprises (MSMEs). Furthermore, violations involving minor technical and procedural defaults in the Companies Act, 2013 will be decriminalised, relieving pressure from criminal courts and the National Company Law Tribunal.
Effecting Ease of Doing Business for Corporates
Key reforms include direct listing of securities by Indian public companies in permissible foreign jurisdictions and lower penalties for all defaults for small companies, one-person companies, producer companies and startups. Moreover, an increase in the borrowing limits of states from 3% to 5% for 2020-21 is expected to provide extra resources of Rs.4.28 lakh crore.
Support to State Governments
The central government will link part of the borrowing to specific reforms including universalisation of ‘One Nation One Ration card’, ease of doing business, power distribution and urban local body revenues. However, this comes with specified, measurable and feasible reform actions that must be achieved.
Analysis of Implemented Measures
Although the increase in resource allocation for MGNREGA and the support to state governments has been welcomed, it is likely that the actual use of the additional 2% borrowing by states could be less due to possible repercussions on normal loans in the future. Also, the privatisation of public sector units during a time of global recession may not find many buyers, thereby effectively leading to a contraction in demand.
