Centre rolls out ₹2.3 trillion loans scheme for farmers to kick-start rural economy and a raft of steps to ease hardship of urban poor hit by the lockdown
The government on Thursday unveiled a ₹2.3 trillion cheap loans programme for farmers to prop up the rural economy ahead of the main summer crop planting season. It also announced a raft of measures to ease the hardships of India’s urban poor who have suffered the most after the economy went idle because of a stringent lockdown.
The package for farmers, including fishermen and those engaged in animal husbandry, will offer access to cheap credit. While PM-Kisan beneficiaries will be able to avail concessional credit through Kisan Credit Card, totalling ₹2 trillion, 30 million small and marginal farmers will get emergency funding to meet crop loan requirements through a refinancing facility by the National Bank for Agriculture and Rural Development (Nabard).
Finance minister Nirmala Sitharaman, however, continued to rely heavily on liquidity support rather than direct cash transfers to the affected, which could have further burdened the government’s exchequer.
While Wednesday’s announcements offering support for small and mid-size businesses, power distribution companies and non-bank lenders will lead to a cash outgo of ₹20,000 crore in FY21, the measures listed on Thursday, also part of the ₹20 trillion package announced by Prime Minister Narendra Modi, could entail an impact of ₹5,000 crore on the government’s coffer.
“The focus has been more on providing concessional credit and liquidity support rather than direct fiscal transfer. The measures are welcome from a human suffering alleviation perspective and the modus operandi could relieve the feared pressure on the fiscal situation," said Dhiraj Relli, managing director and chief executive of HDFC Securities. “However, this may not result in direct and immediate boost to demand and, hence, economic revival can take some time."
Still, some analysts see the fiscal deficit touch 7.9% of GDP in FY21.
“After taking into account the cash outflow because of these measures as well as the previous and the recent excise duty hike and dearness allowance freeze, we now revise our baseline fiscal deficit (excluding extra budgetary resources) to 7.9% of the revised gross domestic product in FY21 from 3.5% earlier, owing to lower revenues and higher expenditure against the backdrop of covid-19 pandemic," State Bank of India said in a research report on Thursday.
As immediate relief to 80 million migrant workers struggling to make ends meet because of loss of livelihoods, the government said the migrants will be given free foodgrain for two months. While states will implement the disbursement, the Centre will fund the programme worth ₹3,500 crore.
“Yes, people are suffering. We notice a lot of people undergoing severe constraints, walking back to their homes. Prime Minister had requested to stay wherever you are. But nevertheless, emotions and concerns being what they are, we will have to extend all benefits and that’s what we are trying to do," Sitharaman said.
Around 5 million street vendors who have lost their livelihood because of the government-imposed lockdown to control covid will have access to a special credit facility of ₹5,000 crore. The government will provide initial working capital of as much as ₹10,000 within a month to restart their businesses.
“This scheme will cover urban as well as rural vendors doing business in the adjoining urban areas. Use of digital payments and timely repayments will be incentivized through monetary rewards," Sitharaman said.
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