Reforms to be focus of 5th and final tranche of economic stimulus package: FM Nirmala Sitharaman
In an effort to provide some relief to migrants returning home, the Centre on Sunday announced a hike in the allocation to the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGA) by ₹40,000 crore. It has also increased the borrowing limit for States by an additional ₹4.28 lakh crore for FY21.
Additionally, the Centre has said there will be a maximum of four PSUs in strategic sectors, and state-owned firms in other segments will eventually be privatised. This will be part of a new coherent Pubic Sector Enterprises Policy to be formulated to push reforms in central public sector enterprises (CPSEs), Finance Minister Nirmala Sitharaman told reporters here while announcing the fifth and final tranche of Atmanirbhar Bharat Abhiyan, the Centre’s ₹20-lakh crore stimulus package.
The FM also announced the suspension of new bankruptcy filings on loan defaults for one year and raised the threshold for insolvency under the Insolvency and Bankruptcy Code (IBC) to ₹1 crore from the current ₹1 lakh, which largely insulates MSMEs from IBC proceedings.
Across five tranches, Sitharaman has presented 54 measures in total, of which 24 are related to liquidity support and expenditure from the Central exchequer while the balance 30 are policy reforms. Taking together all the steps including PM Garib Kalyan and those from the RBI, the government claims the size of the ‘overall stimulus’ package is ₹20.97-lakh crore.
Is it sufficient? “Jitna bhi karo kum hai (however much you do, it is less than required). I can’t see what is adequate. There should no politics on that,” Sitharaman said. Further, she said, the focus should be on where the money is going, how it is used to prevent an MSME from closing, and how it is going to help workers to get wages.
The Centre plans a ₹40,000-crore hike in allocation for MGNREA this fiscal, taking the total allocation to over ₹1.01-lakh crore. This will help generate nearly 300 crore person days in total. Effort is on to address the need for more work during the monsoon season to cover migrant workers who have returned home. The enhanced allocation will help create a larger number of durable and livelihood assets including water conservation assets, which is expected to boost rural consumption, said Sitharaman.
Assistance to States
To deal with the resources crunch, the Centre has permitted States to borrow 5 per cent of the GSDP (gross state domestic product), against the current 3 per cent. The additional borrowing will help States get extra resources of ₹4.28-lakh crore. However, they first need to achieve milestones in at least three out of four reforms — universalisation of ‘one nation one ration card’, ease of doing business, power distribution and urban local body revenues). The remaining 1 per cent additional funds will given in four tranches of 0.25 per cent each and each tranche will be linked to clearly specified, measurable and feasible reform actions.
Based on the recommendations of the Finance Commission, the reforms action include ensuring the sustainability of the additional debt through higher future GSDP growth and lower deficits, promoting the welfare of migrants, reducing leakage in food distribution, increasing job creation through investment, safeguarding the interests of farmers, making the power sector sustainable, and promoting urban development, health and sanitation.
New PSU policy
Under a new policy, Sitharaman said, PSUs in non-strategic sectors will be privatised while those in the identified strategic sector would be capped at four, with the rest to be merged or sold.
Insolvency measures
The FM said a notification will be issued to exclude Covid-related debt during a particular period from the definition of “default” to trigger insolvency proceedings under the IBC. It has also been decided to suspend fresh initiation of insolvency proceedings by up to one year, depending on how the pandemic pans out.