RESPONSE TO DAY 5 ANNOUNCEMENTS OF RELIEF MEASURES
BY FM ON 17TH MAY 2020
(BY B. VINOD KUMAR, VICE-CHAIRMAN, TELANGANA STATE PLANNING BOARD)
Today’s announcements pertain to the following 7 Sectors with particular reference to COVID Crisis.
- MNREGS
- HEALTH AND EDUCATION & COVID
- BUSINESS AND COVID
- DECRIMINLIZATION OF OFFENCES UNDER COMPANIES ACT
- EASE OF DOING BUSINESS
- PUBLIC SECTOR ENTERPRISES
- STATE GOVERNMENTS
- MNREGS
- Budget Estimates for MNERGS was Rs.61,000 crores. Additional allotment made of Rs.40,000 crores being made now to meet the employment requirements of Migrant Labour at their places.
Response: One is not sure how this is practical to provide employment to these migrant labour because the migrant labor leaves behind their family members in their villages who usually already avail MNERGS employment.
- HEALTH AND EDUCATION IN COVID
- All districts will have Infectious Diseases Wards
- Public Health Labs to be set up at Block Level
- 15,000 crores allocated to States. Rs.4,113 crores disbursed to States
- Rs 500 crores for Testing Infrastructure
- PPE kits provided to Medical and Health Staff
- E-Consultancy and Tele-medicine encouraged.
- 50 lakhs Insurance Cover provided to Health Workers fighting COVID
- 11 Crore HQL tablets manufactured
- Digital ON-LINE education to be taken up massively under DEEKSHA programme. One Nation one Digital Platform to be implemented. Community Radios would be installed. One Class One Channel would be enabled. E-Content would be built up.
- Top 100 Universities will start online education infrastructure.
Response: These measures in Health and Education sectors are required to meet the post-COVID challenges and can be appreciated.
- BUSINESS AND COVID
- Debts related to COVID-19 crisis will NOT be declared as Default. No Insolvency proceedings would be initiated up to one year
- Special Insolvency Procedure would be announced for MSMES to overcome the COVID negative impact.
Response: These relaxations are timely and would reduce concerns of stressed companies and businesses
- DECRIMINILIZATION OF OFFENCES FOR COMPANIES DURING COVID
- Company’s Act provisions relaxed to ease the compliance process during COVID lockdown and timelines for compliance extended
- Technical and Procedural lapses during COVID lockdown would be decriminalized.
- Compoundable Offences would be reduced.
Response: These are routine procedural relaxations which could have been done even outside these Relief Measure.
- EASE OF DOING BUSINESS
- Companies can list their shares in Foreign Jurisdictions
Response: This Ease of Doing Business is an on-going process and continuous reviews of existing processes need to be taken in the future too .
- PUBLIC SECTOR ENTERPRISES
- Public Sector Enterprise Policy would be announced
- Private sector would be allowed space in more sectors.
- PSEs would continue to play an important role in Strategic Sectors.
Response: Private Sector role in Economy is being expanded taking advantage of the Current COVID crisis without debate in Parliament.
- STATE GOVERNMENTS AND COVID CRISIS
- Ways and Means advances to States are increased by 60%.
- Net Borrowing of States can be allowed limits to borrow up to 3% of State GSDP. The limit is being increased to 5% of GSDP. The increase in the borrowing limits under these would be linked to implementation of specified Reforms at State Level. This will give States extra resources of Rs.4.38 lakh crores.
Response:The increase in FRBM borrowing limit from 3% to 5% of GSDP is much awaited, States have been requesting it for long time. But putting preconditions is not in the interests of Federal Spirit.
CONCLUSIONS:
With Today’s announcements, the Central Government concluded the relief measures and Stimulus being considered aftermath of COVID Crisis. Government summarizes the funds flow under these measures including the earlier measure under PMGKP as under:
TOTAL RELIEF AND STIMULUS MEASURES AND AMOUNT
| Particulars | Amount |
| Tranche One Stimulus (mostly credit linked) | Rs. 5,94,950 crores |
| Second Tranche(Credit Linked and Interest subvention) | Rs. 3,10,000 crores |
| Third Tranche( Agriculture and Food Sector) | Rs. 1.50,000 crores |
| Fourth and Fifth Tranche ( Viability Gap funding & MNERGS ) | Rs. 48,100 crores |
| SUBTOTAL OF FIVE TRANCHES | Rs.11,02,650 crores |
| Stimulus from earlier measures(Mostly under PM Garib Kalyan Package | Rs.1,92,800 crores |
| RBI Measures (Actual) | Rs.9,94,403 crores |
| GRAND TOTAL | Rs.20,97,053 crores |
Apart from the relief and stimulus under fine announcements of Government, the announcements made by RBI to infuse the liquidity into system to the extent of Rs. 9,94,304 crores.
As can be understood, most of the Stimulus package is through existing Credit Linked Schemes by Banks or through introduction of New Credit Schemes. Apart from these, many Structural Reforms are announced in various sectors of economy a) For Privatization 2) for Digital Transformation 3) for Deregulation 4) For undertaking Reforms at State Government Level. These Credit Linked Stimulus and benefits of Structural Reforms would take long time to take effect. As Nation goes through opening of Economic Activity after Lockdown, there will be need for reforms and stimulus to Businesses and it is a continuous process.
The decision to increase borrowing limit under FRBM from 3% to 5% of State GSDP is welcome and would provide much needed relief to State Governments. But these increases in FRBM Borrowing Limits are linked to specified reforms to be undertaken at State Level. The implementation of the following reforms at State Level is linked to increased borrowing limits under FRBM;
- Universalisation of “One Nation One Ration Card”
- Ease of Doing Business
- Power Distribution Reforms
- Urban Local Body Reforms.
It is not correct to link the increased borrowing limits to above Reforms when States are reeling under the COVID crisis. Reforms are always welcome and they bring also lot of pain in the initial stages of implementation. All States are now relaxing lockdown and Central Government is also taking many measures to reopen the Economy. After lifting of Lockdown, it is expected that there would be sharp spike in COVID19 cases as is the experience at Global Level and as per the warnings of WHO. Therefore, all energies and resources of Governments would be focused in mitigating the increased COVID cases and also with gradual safe reopening of economic activities. Under such circumstances, it would not be in fitness of things to place additional burden on State Governments for undertaking critical reforms in above sectors for providing liquidity support. The capacity of States would be severely constrained to undertake such reforms while facing the COVID crisis.
Therefore, the Govt of India should defer the linking of Reforms to increased borrowing limits and allow the States to borrow at 5% of FRBM limits without any preconditions.
RESPONSE TO DAY 5 ANNOUNCEMENTS OF RELIEF MEASURES
BY FM ON 17TH MAY 2020
(BY B. VINOD KUMAR, VICE-CHAIRMAN, TELANGANA STATE PLANNING BOARD)
Today’s announcements pertain to the following 7 Sectors with particular reference to COVID Crisis.
- MNREGS
- HEALTH AND EDUCATION & COVID
- BUSINESS AND COVID
- DECRIMINLIZATION OF OFFENCES UNDER COMPANIES ACT
- EASE OF DOING BUSINESS
- PUBLIC SECTOR ENTERPRISES
- STATE GOVERNMENTS
- MNREGS
- Budget Estimates for MNERGS was Rs.61,000 crores. Additional allotment made of Rs.40,000 crores being made now to meet the employment requirements of Migrant Labour at their places.
Response: One is not sure how this is practical to provide employment to these migrant labour because the migrant labor leaves behind their family members in their villages who usually already avail MNERGS employment.
- HEALTH AND EDUCATION IN COVID
- All districts will have Infectious Diseases Wards
- Public Health Labs to be set up at Block Level
- 15,000 crores allocated to States. Rs.4,113 crores disbursed to States
- Rs 500 crores for Testing Infrastructure
- PPE kits provided to Medical and Health Staff
- E-Consultancy and Tele-medicine encouraged.
- 50 lakhs Insurance Cover provided to Health Workers fighting COVID
- 11 Crore HQL tablets manufactured
- Digital ON-LINE education to be taken up massively under DEEKSHA programme. One Nation one Digital Platform to be implemented. Community Radios would be installed. One Class One Channel would be enabled. E-Content would be built up.
- Top 100 Universities will start online education infrastructure.
Response: These measures in Health and Education sectors are required to meet the post-COVID challenges and can be appreciated.
- BUSINESS AND COVID
- Debts related to COVID-19 crisis will NOT be declared as Default. No Insolvency proceedings would be initiated up to one year
- Special Insolvency Procedure would be announced for MSMES to overcome the COVID negative impact.
Response: These relaxations are timely and would reduce concerns of stressed companies and businesses
- DECRIMINILIZATION OF OFFENCES FOR COMPANIES DURING COVID
- Company’s Act provisions relaxed to ease the compliance process during COVID lockdown and timelines for compliance extended
- Technical and Procedural lapses during COVID lockdown would be decriminalized.
- Compoundable Offences would be reduced.
Response: These are routine procedural relaxations which could have been done even outside these Relief Measure.
- EASE OF DOING BUSINESS
- Companies can list their shares in Foreign Jurisdictions
Response: This Ease of Doing Business is an on-going process and continuous reviews of existing processes need to be taken in the future too .
- PUBLIC SECTOR ENTERPRISES
- Public Sector Enterprise Policy would be announced
- Private sector would be allowed space in more sectors.
- PSEs would continue to play an important role in Strategic Sectors.
Response: Private Sector role in Economy is being expanded taking advantage of the Current COVID crisis without debate in Parliament.
- STATE GOVERNMENTS AND COVID CRISIS
- Ways and Means advances to States are increased by 60%.
- Net Borrowing of States can be allowed limits to borrow up to 3% of State GSDP. The limit is being increased to 5% of GSDP. The increase in the borrowing limits under these would be linked to implementation of specified Reforms at State Level. This will give States extra resources of Rs.4.38 lakh crores.
Response:The increase in FRBM borrowing limit from 3% to 5% of GSDP is much awaited, States have been requesting it for long time. But putting preconditions is not in the interests of Federal Spirit.
CONCLUSIONS:
With Today’s announcements, the Central Government concluded the relief measures and Stimulus being considered aftermath of COVID Crisis. Government summarizes the funds flow under these measures including the earlier measure under PMGKP as under:
TOTAL RELIEF AND STIMULUS MEASURES AND AMOUNT
| Particulars | Amount |
| Tranche One Stimulus (mostly credit linked) | Rs. 5,94,950 crores |
| Second Tranche(Credit Linked and Interest subvention) | Rs. 3,10,000 crores |
| Third Tranche( Agriculture and Food Sector) | Rs. 1.50,000 crores |
| Fourth and Fifth Tranche ( Viability Gap funding & MNERGS ) | Rs. 48,100 crores |
| SUBTOTAL OF FIVE TRANCHES | Rs.11,02,650 crores |
| Stimulus from earlier measures(Mostly under PM Garib Kalyan Package | Rs.1,92,800 crores |
| RBI Measures (Actual) | Rs.9,94,403 crores |
| GRAND TOTAL | Rs.20,97,053 crores |
Apart from the relief and stimulus under fine announcements of Government, the announcements made by RBI to infuse the liquidity into system to the extent of Rs. 9,94,304 crores.
As can be understood, most of the Stimulus package is through existing Credit Linked Schemes by Banks or through introduction of New Credit Schemes. Apart from these, many Structural Reforms are announced in various sectors of economy a) For Privatization 2) for Digital Transformation 3) for Deregulation 4) For undertaking Reforms at State Government Level. These Credit Linked Stimulus and benefits of Structural Reforms would take long time to take effect. As Nation goes through opening of Economic Activity after Lockdown, there will be need for reforms and stimulus to Businesses and it is a continuous process.
The decision to increase borrowing limit under FRBM from 3% to 5% of State GSDP is welcome and would provide much needed relief to State Governments. But these increases in FRBM Borrowing Limits are linked to specified reforms to be undertaken at State Level. The implementation of the following reforms at State Level is linked to increased borrowing limits under FRBM;
- Universalisation of “One Nation One Ration Card”
- Ease of Doing Business
- Power Distribution Reforms
- Urban Local Body Reforms.
It is not correct to link the increased borrowing limits to above Reforms when States are reeling under the COVID crisis. Reforms are always welcome and they bring also lot of pain in the initial stages of implementation. All States are now relaxing lockdown and Central Government is also taking many measures to reopen the Economy. After lifting of Lockdown, it is expected that there would be sharp spike in COVID19 cases as is the experience at Global Level and as per the warnings of WHO. Therefore, all energies and resources of Governments would be focused in mitigating the increased COVID cases and also with gradual safe reopening of economic activities. Under such circumstances, it would not be in fitness of things to place additional burden on State Governments for undertaking critical reforms in above sectors for providing liquidity support. The capacity of States would be severely constrained to undertake such reforms while facing the COVID crisis.
Therefore, the Govt of India should defer the linking of Reforms to increased borrowing limits and allow the States to borrow at 5% of FRBM limits without any preconditions.
