Article

Stimulus Day-5; One Final Push Given to the Stimulus Package

18 May 2020

On 17 May, the Finance Minister, Nirmala Sitharaman laid out the details of the fifth and final tranche of the stimulus package. In terms of allocation, there was little left after the third day announcements. What was really ironic was that the last phase of the Stimulus Package announcement coincided with the extension of lockdown till May 31st in key geographies like Mumbai, Pune, Delhi and Tamil Nadu. These are also the worst affected by the COVID-19 syndrome. What it underlines is that despite the Rs.21 trillion already allocated, an extension of the lockdown means that more allocation may be required in the coming weeks. But let us first look at how the overall Stimulus package of Rs.21,00,000 crore has been spent by the government.

How the overall package has panned out?

As per the statement of Nirmala Sitharaman, the government has directly and indirectly allocated a total sum of Rs.20.97 trillion for the Stimulus Package to be precise. The table below captures the gist of the outlay.

Nature of Spend

Details of the Spend

Amount (Rs. in crore)

First Tranche (Fiscal)

Package for MSMEs, DISCOMS, NBFCs

5,94,550

Second Tranche (Fiscal)

Migrant workers, farmers and tribal

3,10,000

Third Tranche (Fiscal)

Farm infrastructure and agri marketing

1,50,000

Fourth & Fifth Tranche

Structural reforms focus

48,100

 

Stimulus 2.0 outlay

11,02,650

 

Earlier fiscal measures

1,92,800

RBI Measures (Monetary)

OMOs, CRR cuts, TLTRO, LTRO, TLTRO 2.0

8,01,603

 

Grand Stimulus Package (Total)

20,97,053

As can be seen from the above table, the amount of Rs.21 trillion encompasses the fiscal outlays made earlier plus the fiscal outlays announced in the last five days plus the monetary stimulus already done. This does not include the monetary stimulus that could be additionally taken up by the RBI.

Day 5 of the Stimulus – Rounding up the structural issues

The fifth day did not have too much by way of fiscal allocations since most of the allocations had been completed by the end of Day 3. However, the reforms on Day 5 did focus on making life simpler for businesses. Here are some quick takeaways.

  • The finance minister has proposed additional funding of Rs.40,000 crore for the MGNREGS scheme over and above the Budgetary allocation. This is expected to improve jobs and livelihood means in the rural areas.
  • The rapid spread of the COVID-19 pandemic has underlined the urgent need for quality healthcare at a primary level. Government has announced that all districts will have infectious disease hospitals and public health labs at block-level.
  • In a move long called for, the FM has announced that COVID-19 related debt would be excluded from the definition of default under the IBC. Minimum threshold to initiate insolvency raised 100-fold to Rs one crore. No new insolvencies in next one year.
  • Another heavy handed stipulation has been done away with. Violations under the Companies Act will be decriminalised. This will ease the burden on courts and tribunals and put less pressure on the entrepreneur taking on the business risk.
  • In a move that could be of great benefit to companies in the IT, pharma, biotechnology and ecommerce space, companies will now be permitted to directly list securities in foreign jurisdictions before listing locally.
  • All sectors hitherto reserved for PSUs are now open to the private sector and role of PSUs to be limited to only some critical areas. Government will notify strategic areas where 100% private partnership will not be permitted.
  • Considering the financial stress on states, the central government will hike borrowing limit of states from 3% to 5% for FY21. This will give ensure resources of Rs.428,000 crore to states. However, states have only used 14% of the limit authorised to them.
With the lockdown being extended, the stimulus looks more like work-in-progress. It would be interesting to see the overall impact on the fiscal deficit.

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Stimulus Day-5; One Final Push Given to the Stimulus Package

18 May 2020

On 17 May, the Finance Minister, Nirmala Sitharaman laid out the details of the fifth and final tranche of the stimulus package. In terms of allocation, there was little left after the third day announcements. What was really ironic was that the last phase of the Stimulus Package announcement coincided with the extension of lockdown till May 31st in key geographies like Mumbai, Pune, Delhi and Tamil Nadu. These are also the worst affected by the COVID-19 syndrome. What it underlines is that despite the Rs.21 trillion already allocated, an extension of the lockdown means that more allocation may be required in the coming weeks. But let us first look at how the overall Stimulus package of Rs.21,00,000 crore has been spent by the government.

How the overall package has panned out?

As per the statement of Nirmala Sitharaman, the government has directly and indirectly allocated a total sum of Rs.20.97 trillion for the Stimulus Package to be precise. The table below captures the gist of the outlay.

Nature of Spend

Details of the Spend

Amount (Rs. in crore)

First Tranche (Fiscal)

Package for MSMEs, DISCOMS, NBFCs

5,94,550

Second Tranche (Fiscal)

Migrant workers, farmers and tribal

3,10,000

Third Tranche (Fiscal)

Farm infrastructure and agri marketing

1,50,000

Fourth & Fifth Tranche

Structural reforms focus

48,100

 

Stimulus 2.0 outlay

11,02,650

 

Earlier fiscal measures

1,92,800

RBI Measures (Monetary)

OMOs, CRR cuts, TLTRO, LTRO, TLTRO 2.0

8,01,603

 

Grand Stimulus Package (Total)

20,97,053

As can be seen from the above table, the amount of Rs.21 trillion encompasses the fiscal outlays made earlier plus the fiscal outlays announced in the last five days plus the monetary stimulus already done. This does not include the monetary stimulus that could be additionally taken up by the RBI.

Day 5 of the Stimulus – Rounding up the structural issues

The fifth day did not have too much by way of fiscal allocations since most of the allocations had been completed by the end of Day 3. However, the reforms on Day 5 did focus on making life simpler for businesses. Here are some quick takeaways.

  • The finance minister has proposed additional funding of Rs.40,000 crore for the MGNREGS scheme over and above the Budgetary allocation. This is expected to improve jobs and livelihood means in the rural areas.
  • The rapid spread of the COVID-19 pandemic has underlined the urgent need for quality healthcare at a primary level. Government has announced that all districts will have infectious disease hospitals and public health labs at block-level.
  • In a move long called for, the FM has announced that COVID-19 related debt would be excluded from the definition of default under the IBC. Minimum threshold to initiate insolvency raised 100-fold to Rs one crore. No new insolvencies in next one year.
  • Another heavy handed stipulation has been done away with. Violations under the Companies Act will be decriminalised. This will ease the burden on courts and tribunals and put less pressure on the entrepreneur taking on the business risk.
  • In a move that could be of great benefit to companies in the IT, pharma, biotechnology and ecommerce space, companies will now be permitted to directly list securities in foreign jurisdictions before listing locally.
  • All sectors hitherto reserved for PSUs are now open to the private sector and role of PSUs to be limited to only some critical areas. Government will notify strategic areas where 100% private partnership will not be permitted.
  • Considering the financial stress on states, the central government will hike borrowing limit of states from 3% to 5% for FY21. This will give ensure resources of Rs.428,000 crore to states. However, states have only used 14% of the limit authorised to them.
With the lockdown being extended, the stimulus looks more like work-in-progress. It would be interesting to see the overall impact on the fiscal deficit.