On the table: safety net for the poor, MSMEs, tax breaks, land assets

The Center is also likely to push for the privatization of some state-owned companies, said a senior government official.

Prime Minister Narendra Modi’s announcement of a Rs 20 lakh crore package to help cushion Covid’s economic impact and setting the stage for “self-sufficiency”, could revolve around measures that the government will present in stages starting on Wednesday.

“Land, work, liquidity and laws”: this is how the prime minister defined the key themes of the package. This is likely to translate into: steps to boost the liquidity of Micro, Small and Medium-sized Enterprises (MSMEs), among the most affected sectors; a boost to the monetization process of surplus land assets held by ministries and central UPMs; state-led easing of labor regulations and additional tax exemptions for companies investing above a certain threshold in technology-intensive sectors such as the pharmaceutical industry, medical devices, and telecommunications equipment.

In the coming days, Finance Minister Nirmala Sitharaman will provide details of the package that will likely include measures to boost local manufacturing, help improve India’s competitiveness in a global economy, and provide relief to the hapless poor, workers and migrants. .

On April 24, the Minister of MSMEs, Nitin Gadkari, indicated the possibility of establishing a revolving fund of Rs 1 lakh crore for MSMEs. The government plan is expected to guarantee higher working capital limits, settlement of outstanding installments and credit guarantee against loss of loans to MSMEs for banks to lend to them.

Speaking to The Indian Express, NITI Aayog Vice President Rajiv Kumar said: “They will see a series of reforms now, as they have seen in the case of labor reforms in the states. (The Prime Minister) is hell-bent on turning this crisis into an opportunity, and I think this is what will happen. ”

When asked if the government has the fiscal space for such a package, Kumar said: “Even the most severe fiscal hawks have stopped asking that question … If you can make GDP grow, you create fiscal space. On the other hand If the GDP stops growing, the same fiscal spending increases a lot (as a percentage of GDP), the proportion (fiscal deficit) increases much more ”.

READ | The math: it’s 10% of GDP, but less than 5% in cash

The Center is also likely to push for the privatization of some state-owned companies, said a senior government official.

One of the busiest stations for the north Indian rail route, the Lokmanya Tilak terminal in Mumbai, closed during the shutdown, saw large crowds on Tuesday.

On the labor reform front, nine states have already amended laws to increase hours of work. Madhya Pradesh, Uttar Pradesh and Gujarat have also announced the suspension of labor laws for new companies for a period of almost three years. A review of core labor laws is also expected to follow suit.

An exemption from the Provident Fund contribution is expected for more small and medium-sized companies by expanding the scope that already covers establishments with up to 100 employees with 90 percent or more of monthly salary less than Rs 15,000.

To provide wage support to organized sector workers, the government has been collecting data for companies that have filed their returns under the EPF scheme but have deferred the payment of their contribution from dues. Similar support measures could be extended for migrant workers, as the government has already collected identification details for more than 22 lakh workers.

READ | The center plans to take the opinions of the states when classifying the zones

Other reforms Modi indicated include those related to supply chains, the rational tax system, simple and clear laws, capable human resources and a solid financial system.

The Prime Minister said that in a globalized world, self-sufficiency is different from being self-centered, suggesting that the government will also take steps to attract foreign investment.

While no new measures to provide liquidity in the economy have yet been announced, on March 27, RBI Governor Shaktikanta Das had announced three liquidity measures: long-term repos (TLTRO) operations, lower 100 bp cash reserve and increased marginal position. ease (MSF) at 3 percent of the legal liquidity index (SLR). The RBI said that these would generate Rs 374,000 crore to stabilize the financial system that was hit by the pandemic.

At 10 percent of GDP, India’s package is now in line with the stimulus given by many other G-20 countries, including the United States.

Three weeks later, the RBI stepped in again to release additional funds of Rs 1 lakh crore: Rs 50,000 crore from refinancing to banks for loans to NBFC through a new TLTRO 2 and support of Rs 50,000 crore for financial institutions. On April 27, he opened a special liquidity line for mutual funds in the amount of Rs 50 billion rupees after Franklin Templeton announced the liquidation of six credit risk schemes leading to redemption pressure on debt funds. The central bank, along with the government, is expected to continue the drive to improve liquidity in the economy.

At 10 percent of GDP, India’s package is now in line with the stimulus given by many other G-20 countries, including the United States. This is also higher than the Rs 5-10 lakh-crore package required by various industry associations to combat Covid adversity.

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