Home / Politics / Policy /  Narendra Modi announces range of credit sops in wake of demonetisation

In the end it was a speech for Bharat.

The day after the government’s demonetisation drive concluded, Prime Minister Narendra Modi announced a range of schemes targeting the poor, lower middle class, senior citizens and small businessmen—key constituents of Bharat.

Undoubtedly it is designed to strengthen himself politically and insulate against political barbs from the opposition that the poor have borne the brunt of Modi’s crusade against corruption.

At their core, the concessions sought to address the aspiration quotient of this segment of India, some of whom have also been in the firing line of the demonetisation exercise.

An apt example being the concessions offered to the rural and urban poor to enable them to acquire a house. Materially, India has traded up and achieving subsistence is no longer the challenge; instead, addressing aspirations is—in this, the house is central to any household in India.

Also Read | 50 days of demonetisation

Modi, in an address lasting a little less than 45 minutes, announced two housing schemes for the urban poor and lower middle class. From 2017, for housing loans up to Rs9 lakh, the government will provide 4% interest subsidy, while for housing loans of up to Rs12 lakh, a 3% interest subsidy will be given. Under the Pradhan Mantri Awas Yojana, 33% more houses will be constructed.

Similarly, for the rural poor and lower middle class, those willing to construct houses or expand their existing houses will get an interest subsidy of 2% for loans up to Rs2 lakh.

Announcing a limited interest waiver scheme for the farmers who have taken loans from district cooperative central banks and primary societies, the prime minister said the government will bear the interest burden of farmers for 60 days. In addition to Rs21,000 crore of loans made available for farmers, another Rs20,000 crore will be provided through NABARD (National Bank for Agriculture and Rural Development).

Modi said that in next the three months, 30 million Kisan credit cards will be converted into Rupay cards so that farmers can withdraw money from ATMs, instead of having to visit bank branches.

Also Read | RBI increases ATM withdrawal limit to Rs4,500 starting 1 January

For micro, small and medium enterprises, the government will provide a credit guarantee of Rs2 crore, up from Rs1 crore at present. The government will provide this guarantee to banks through a trust that will also cover loans extended by non-banking financial companies (NBFCs).

Small and medium enterprises account for 95% of industrial units in the country and 40% of the value addition in the manufacturing sector, according to a 2002 survey by the government. These entities, however, face difficulties in accessing credit as they usually do not have immovable assets to offer as collateral. Raising the limit of credit guarantee offers some relief to these firms.

Banks need to be encouraged to lend to this segment, said experts.

“Banks have to develop the culture of lending against movable assets, which SMEs could offer. Incentives have to be built into the law to give lenders comfort in extending loans against such assets like a bale of cotton. There also have to be provisions for timely recovery of such loans in the event of a default," said Sumant Batra, chairman of law firm Kesar Dass B. & Associates and an expert on SMEs and bankruptcy law.

Modi said 35 million people have taken benefit of the government’s MUDRA (Micro Units Development and Refinance Agency) scheme, and that the government now targets to double the number of beneficiaries.

To reduce maternal mortality, the prime minister said, Rs6,000 will be transferred to the accounts of pregnant women in all 650 districts of the country in order to cover nutrition and other expenditures. A similar pilot scheme is at present available for pregnant women in 53 districts, with a financial assistance of Rs4,000.

To protect senior citizens who may see an erosion of income with falling savings rates, prime minister said that for savings of up to Rs7.5 lakh, they will be guaranteed 8% interest rate for 10 years. Senior citizens can receive this interest income every month.

“Disappointed with Prime Minister’s speech, many questions were left unanswered. His decision paralysed economy, country cannot run this way," Randeep Singh Surjewala, chief spokesperson for the Congress party, told reporters.

“We once again urge the PM to withdraw the restrictions imposed on withdrawals post demonetisation," he added.

“Initiatives aimed at benefiting the lower income segments of the country is indeed a welcome move by the govt. It is fairly evident that the govt is serious about comprehensive inclusion. Low cost housing should witness growth in the medium to long term. The government’s commitment to a less cash society will also aid in reforming the tax structure for the better," said an emailed statement from State Bank of India chairman Arundhati Bhattacharya.

Throughout his address, televised on national broadcaster Doordarshan, Modi kept emphasizing three words: soshit (exploited), pidit (oppressed) and vanchit (deprived) making it clear that the announcements he made there on would be for the benefit for the weakest sections of the society.

Also Read | Demonetisation: Here’s what PM Narendra Modi has said so far

In line with the series of public engagements that he has made in the last one fortnight, Modi on Saturday too talked about his government’s commitment to fight corruption and black money.

“We cannot let this fight against corruption and black money stop. Let us all come together to lay a foundation stone for the bright future of our country," Modi said adding that “law will take its own course" against those who have been found guilty of “grave offences" during the last 50 days.

Modi’s address comes just ahead of polling in five states, including politically crucial Uttar Pradesh. The polls are crucial given that the Bharatiya Janata Party (BJP) is looking to increase its political footprint and dominance in North India.

Political analysts feel Modi was speaking to the most marginalized on Saturday.

“In his speech, Modi is talking to those people in India who are living in one-room houses, people who are living in slums and that India which is really the lower class but is thriving on their aspirations," said Jai Mrug, a Mumbai-based political analyst.

“Yes, it is a political speech but I don’t think it is an election speech. I would say it is a mid-term political strategy where the attempt is to change the landscape of BJP’s support base. The speech showed that Modi is thinking of how his government can reach to the last, rural annals of the country," Mrug added.

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