Finance Minister Nirmala Sitharaman announced tax relief on select home sale deals, enhanced credit guarantee programme for small businesses and provided incentives for new job creation as the government widened stimulus measures to boost the economy.
The measures, that also include additional fertiliser subsidy and already announced production-linked incentive scheme for manufacturing units, totalled Rs 2.65 lakh crore, taking the cumulative stimulus package announced since the lockdown to almost Rs 30 lakh crore, or 15 per cent of the Gross Domestic Product (GDP).
It also includes additional funding for real estate developers and contractors, a new employment scheme and additional spending on the rural jobs plan.
The Rs 29.87 lakh crore stimulus package, spread over five announcements over the past few months, includes Rs 12.71 lakh crore of liquidity boosting measures by the Reserve Bank of India (RBI).
The previous stimulus measures announced included free foodgrains and cooking gas to the poor and cash support to some.
The 12 economic stimulus measures are:
1) Atmanirbhar Bharat Rojgar Yojana
• A new scheme to incentivise job creation amid pandemic has been launched. Under this scheme, if EPFO-registered establishments take in new employees without EPFO registration or those who lost jobs earlier, the government will provide subsidy.
• It will benefit employees on monthly wages less than Rs 15,000.
• The subsidy to be provided by the central government for two years in respect of new eligible employees engaged after October 1 will include employee’s contributions (12 per cent of wages) and employer’s contributions (12 per cent of wages) totalling 24 per cent of wages.
• In case of establishments employing more than 1,000 employees, the government will provide employee’s EPF contributions (12 per cent of EPF wages).
• The scheme will be effective from October 1, 2020 and operational till June 30, 2021.
2) Emergency Credit Line Guarantee Scheme
• The Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), under which small businesses can get collateral-free loans, has been extended till March 31, 2021.
• The same has also been extended to 26 stressed sectors identified by a high-level committee as also the health care sector. Entities will get additional credit up to 20 per cent of outstanding credit with a tenor of five years, including a one year moratorium on principal repayment.
3) Production Linked Incentive scheme
• A Production Linked Incentive (PLI) scheme worth Rs 1.46 lakh crore for manufacturing units was approved by the Cabinet earlier this week.
• As many as 10 more champion sectors will be covered under the PLI scheme to help boost competitiveness of domestic manufacturing. This may give a big boost to the economy, investment, exports and job creation.
• The 10 sectors are:
Advance Cell Chemistry Battery, Electronic/Technology Products, Automobiles & Auto Components, Pharmaceutical Drugs, Telecom & Networking Products, Textile Products, Food Products, High Efficiency Solar PV Modules, White Goods (ACs & LED) and Specialty Steel.
4) Additional outlay of for PM Awas Yojana (Urban)
• An additional outlay of Rs 18,000 crore will be made towards the affordable urban housing programme (PM Awas Yojana-Urban).
• This will help start work on 12 lakh houses and complete 18 lakh houses, create additional 78 lakh jobs and improve production and sale of steel and cement, resulting in a multiplier effect on the economy.
5) Support for construction & infrastructure
• To provide ease of doing business and relief to contractors whose money otherwise remains locked up, performance security on contracts has been reduced from 5-10 per cent to 3 per cent.
• It will also extend to ongoing contracts and public sector enterprises.
• Earnest Deposit Money for tenders will be replaced by Bid Security Declaration. The relaxations in the General Financial Rules will be in force till December 31, 2021.
6) Income Tax relief for Developers & Home Buyers
• The government relaxed income tax rules to allow primary or first sale of housing units of up to Rs 2 crore. Differential between circle rate and agreement value in real estate income tax under Section 43CA of IT Act has been increased from 10 per cent to 20 per cent. Currently, the law restricts differential between circle rate and agreement value at 10 per cent.
• This relaxation is applicable till June 2021.
7) Platform for infra debt financing
• Government will make Rs 6,000 crore equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF provide a debt of Rs 1.1 lakh crore for infrastructure projects by 2025.
8) Rs 65,000 crore for subsidised fertilisers
• The government will provide Rs 65,000 crore of additional subsidy on fertiliser to ensure the crop nutrient is available to farmers for the upcoming crop season.
9) Boost for rural employment
• Additional outlay of Rs 10,000 crore will be provided for PM Garib Kalyan Rojgar Yojana to provide rural employment.
10) Boost for project exports
• Rs 3,000 crore boost is being provided to EXIM Bank for promoting project exports under Indian Development and Economic Assistance Scheme (IDEAS scheme). This will help EXIM Bank facilitate Lines of Credit development assistance activities and promote exports from India.
11) Capital and industrial stimulus
• Rs 10,200 crore additional budget stimulus is being provided for capital and industrial expenditure on domestic defence equipment, industrial infrastructure and green energy.
12) R&D grant for COVID-19 vaccine
• The government announced a Rs 900 crore grant to the Department of Biotechnology (DBT) for COVID-19 vaccine research. This is being provided for ‘Mission COVID Suraksha’, purely for R&D. The grant does not cover the actual cost of vaccine and distribution expenses, which will be made separately as and when the vaccine is available.