Atmanirbhar Bharat 3.0, the third set of measures for reviving the economy announced by the Finance Minister (FM) on Thursday, are fairly effective announcements that addressed some issues needing attention, while others are more for the medium-term. The sector-based approach that comes under the 12 announcements would provide succour to the industries facing problems more at the operational level, which is critical. Let us look at some of the major growth boosting measures.
The focus has been on job creation. Providing incentives to EPFO-registered establishments to hire more people at the lower cadres, where the income has to be less than Rs 15,000 per month, will address the issue of job losses that took place especially in the SME sector. The higher-end workers would be excluded, given this threshold, and hence, will be useful for those at the lower levels. It may not affect corporates in a significant way. Even at the informal level, there are higher allocations in the PM Scheme at the rural level, which will help the displaced migrants. This is effective, as it also supplements the NREGA efforts that have been successful in the last six months.
Second, the real estate sector has something to cheer. The government has allocated an additional Rs 18,000 crore under the PM Awaas Yojana, which will help in completion of projects and starting new ones. This is a big boost for the sector and will help in creating jobs. In turn, this can lead to higher income and spending. Similarly, there will be a clearance of inventory on account of the incentive being provided for middle class with changes in the income tax rules due to differences in circle rates and income tax rates.
Third, the Emergency Credit Line Guarantee Scheme (ECLGS) has been extended till March 31, 2021 as there is still a buffer left. However, the innovative measure this time is to also cover the Kamath Committee-identified 26 stressed sectors (plus health) that have outstanding credit of between Rs 50-500 crore where additional 20 per cent loans taken will get this guarantee. This holds for the SMA-0 loans that will help companies in these segments. It is fairly exhaustive, but the issue is that as it applies for those companies in this category that would have low probability of turning non-performing assets (NPAs), the flow of credit would have been smooth anyway. Therefore, while several companies may qualify, the risk factor would be low.
Fourth, the equity transfusion of Rs 6,000 crore for National Investment and Infrastructure Fund (NIIF) builds a strong foundation for further funding through both equity from other sovereign funds as well as debt. This can be seen more as a medium-term measure that will not have an impact this year, but build the foundation for further infra creation in the next five years. Additionally, the government is investing Rs 10,200 crore for capex in defence-related industries, which will have strong backward linkages with steel, machinery, chemicals, etc. The important thing here is how quickly this is deployed in the financial year.
The other measures of funding of EXIM bank to prop up exports and additional subsidy on fertilizers to aid farmers in the coming years could be considered to be positive again for exports and agriculture. The thrust on research and development (R&D) for Covid-19 vaccine is again very timely, as the fight against the pandemic is a long haul. The PLI scheme announced Wednesday would work over a period of five years or so, but incentivise 10 sectors.
The package hence is quite timely and plugs in the gaps that have evolved in the last few months. What is commendable is that the approach of the government has been very proactive in addressing issues that pose hurdles.
(Madan Sabnavis is chief economist at CARE Ratings. Views expressed in this article are personal.)