Economic package during COVID-19

Part of: GS Prelims and GS-III- Economics

The Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman announced Rs 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus. While addressing the press conference here, Smt. Sitharaman said “Today’s measures are intended at reaching out to the poorest of the poor, with food and money in hands, so that they do not face difficulties in buying essential supplies and meeting essential needs.”

Finance Minister announces Rs 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus

? Insurance cover of Rs 50 Lakh per health worker fighting COVID-19 to be provided under the Insurance Scheme

? 80 crore poor people will get 5 kg wheat or rice and 1 kg of preferred pulses for free every month for the next three months

? 20 crore women Jan Dhan account holders to get Rs 500 per month for next three months

? Increase in MNREGA wage to Rs 202 a day from Rs 182 to benefit 13.62 crore families

? An ex-gratia of Rs 1,000 to 3 crore poor senior citizens, poor widows and poor disabled

? Government to front-load Rs 2,000 paid to farmers in the first week of April under the existing PM Kisan Yojana to benefit 8.7 crore farmers

? Central Government has given orders to State Governments to use Building and Construction Workers Welfare Fund to provide relief to Construction Workers.

Following are the components of the Pradhan Mantri Garib Kalyan Package: —

PRADHAN MANTRI GARIB KALYAN PACKAGE

I. Insurance scheme for health workers fighting COVID-19 in Government Hospitals and Health Care Centres

• Safai karamcharis, ward-boys, nurses, ASHA workers, paramedics, technicians, doctors and specialists and other health workers would be covered by a Special Insurance Scheme.

• Any health professional, who while treating Covid-19 patients, meets with some accident, then he/she would be compensated with a number of Rs 50 lakh under the scheme.

• All government health centres, wellness centres and hospitals of the Centre as well as States would be covered under this scheme approximately 22 lakh health workers would be provided insurance cover to fight this pandemic.

II. PM Garib Kalyan Ann Yojana

• Government of India would not allow anybody, especially any poor family, to suffer on account of the non-availability of foodgrains due to disruption in the next three months.

• 80 crore individuals, i.e, roughly two-thirds of India’s population would be covered under this scheme.

• Each one of them would be provided double of their current entitlement over next three months.

• This additionality would be free of cost.

Pulses:

• To ensure adequate availability of protein to all the above-mentioned individuals, 1 kg per family, would be provided pulses according to regional preferences for the next three months.

• These pulses would be provided free of cost by the Government of India.

III. Under Pradhan Mantri Garib Kalyan Yojana,

Benefit to farmers:

• The first instalment of Rs 2,000 due in 2020-21 will be front-loaded and paid in April 2020 itself under the PM KISAN Yojana.

• It would cover 8.7 crore farmers

IV. Cash transfers Under PM Garib Kalyan Yojana:

Help to Poor:

• A total of 20.40 crores PMJDY women account-holders would be given an ex-gratia of Rs 500 per month for the next three months.

Gas cylinders:

• Under PM Garib Kalyan Yojana, gas cylinders, free of cost, would be provided to 8 crore poor families for the next three months.

Help to low wage earners in organised sectors:

• Wage-earners below Rs 15,000 per month in businesses having less than 100 workers are at risk of losing their employment.

• Under this package, the government proposes to pay 24 per cent of their monthly wages into their PF accounts for the next three months.

• This would prevent disruption in their employment. Support for senior citizens (above 60 years), widows and Divyang:

• There are around 3 crore aged widows and people in the Divyang category who are vulnerable due to economic disruption caused by COVID-19.

• Government will give them Rs 1,000 to tide over difficulties during the next three months.

MANGA

• Under PM Garib Kalyan Yojana, MNREGA wages would be increased by Rs 20 with effect from 1 April 2020. Wage increase under MNREGA will provide an additional Rs 2,000 benefit annually to a worker.

• This will benefit approximately 13.62 crore families.

V. Self-Help groups:

• Women organised through 63 lakhs Self Help Groups (SHGs) support 6.85 crore households.

a) Limit of collateral-free lending would be increased from Rs 10 to Rs 20 lakhs.

VI. Other components of PM Garib Kalyan package

Organised sector:

• Employees’ Provident Fund Regulations will be amended to include the Pandemic as the reason to allow a non-refundable advance of 75 per cent of the amount or three months of the wages, whichever is lower, from their accounts.

• Families of four crore workers registered under EPF can take benefit from this window. Building and Other Construction Workers Welfare Fund:

• Welfare Fund for Building and Other Constructions Workers has been created under a Central Government Act.

• There are around 3.5 Crore registered workers in the Fund.

• State Governments will be given directions to utilise this fund to provide assistance and support to these workers to protect them against economic disruptions.

District Mineral Fund

• The State Government will be asked to utilise the funds available under District Mineral Fund (DMF) for supplementing and augmenting facilities of medical testing, screening and other requirements in connection with preventing the spread of the CVID-19 pandemic as well as treating the patients affected with this pandemic.

RBI ANNOUNCED

• RBI has permitted banks to give 3-month moratorium on term loans and EMIs
• The central bank has also slashed the repo rate by 75 basis points
• Shaktikanta Das assured Indians that RBI is ready to tackle financial difficulties due to Covid-19 pandemic

The RBI's MPC has voted in favour of an interest rate cut to the tune of 75 basis points, which brings the repo rate down to 4.4 per cent from 5.15 per cent. The reverse repo rate has also been reduced by 90 basis points to 4 per cent in a bid to maintain financial stability and revive growth.

RBI Governor said that the outlook remains extremely uncertain at the time and going forward much will depend on how India battles the Covid-19 pandemic. "The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the world will slip into recession,".

EMI, LOANS ON HOLD

It also announced that banks are permitted to allow a three-month moratorium for on payment of EMIs on all term loans that were outstanding on March 1.

"MPC noted that global economic activity has come to a near stand-still as Covid-19 related lockdowns and social distancing in affected countries. Expectations of a shallow recovery in 2020 from 2019's decade low in global growth have been dashed,"

However, this means that the final decision to provide such a relief is in the hands of the banks. This is one of the key takeaways from RBI's announcements as many people have been financially affected due to the lockdown implemented to prevent novel coronavirus from spreading in India. But it remains to be seen as to what extent this helps customers.

OTHER LIQUIDITY MEASURES

Apart from reducing key rates, the RBI also announced a slew of liquidity measures related to TLTRO, CRR and MLCR to ease mounting pressure. (The targeted longer-term refinancing operations (TLTROs) are Eurosystem operations that provide financing to credit institutions. By offering banks long-term funding at attractive conditions they preserve favourable borrowing conditions for banks and stimulate bank lending to the real economy)

"It has been decided to reduce the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3% of Net Demand and Time Liabilities with effect from the fortnight beginning March 28 for a period of 1 year," the RBI governor announced.

The announcement came just a day after the government unveiled a Rs 1.70 lakh crore relief package to shield poor people from the virus outbreak.

The RBI's relief measures announced in view of the Covid-19 pandemic stand at 3.2 per cent of the GDP.

Jai Hind Jai Bharat