17 May, 2020 I Economics

Central Government’s
The government today announced the 5th and final tranche of the
Economic Stimulus - Part 5 special economic package under Aatmanirbhar Bharat. The package
announced today focused on employment under MGNREGS, health
Contact: and education, ease in doing business for corporates post the
Madan Sabnavis
resumption of activities, relaxations under IBC, decriminalisation of
Chief Economist
madan.sabnavis@careratings.com Companies Act, more private sector participation in various sectors
91-22-6837 4433 and lowering the reliance on public sector enterprises (PSEs). The
central government also announced extension of borrowings limits for
Authors: the state governments, subject to certain reforms.
Kavita Chacko
Senior Economist The array of measures announced in the Aatmanirbhar Bharat package
kavita.chacko@careratings.com announced over 5 days pertain broadly to MSMEs, NBFCs/HFCs/MFIs,
EPFs, power companies, housing, agriculture and allied, migrant
Dr. Rucha Ranadive
labours, farmers, health sector, civil aviation, businesses as well as
Economist
rucha.ranadive@careratings.com state governments.

Sushant Hede The total quantum of announcements made by the government, under
Associate Economist the special economic package, including the measures undertaken by
sushant.hede@careratings.com the RBI, amounts to Rs. 20.97 lakh crore (as detailed in table 1 and
table 2 below).

Table 1: Summary of Aatmanirbhar Bharat package

Mradul Mishra (Media Contact)
mradul.mishra@careratings.com Amount
91-22-6837 4424 Announcements
(Rs crs)
Announcements prior to 5 tranches of
1,92,800
Disclaimer: This report is prepared by CARE Ratings Ltd. Economic package
CARE Ratings has taken utmost care to ensure accuracy
and objectivity while developing this report based on RBI measures (March-April’20) 8,01,603
information available in public domain. However, neither
Tranche 1 (13 May’20) 5,94,550
the accuracy nor completeness of information contained
in this report is guaranteed. CARE Ratings is not Tranche 2 (14 May ‘20 3,10,000
responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the Tranche 3 (15 May’20) 1,50,000
use of information contained in this report and especially
states that CARE Ratings has no financial liability
Tranche 4 and Tranche 5 (16 and 17 May'20) 48,100
whatsoever to the user of this report. Total package 20,97,053
Source: Finance Ministry
 Economics: Special Economic Package – Part 5

Table 2: Breakup of special economic package (Aatmanirbhar Bharat)

Measures Amount (Rs crs)

Revenue lost due to tax concessions since Mar 22, 2020 7,800
Pradhan Mantri Garib Kalyan Yojana 1,70,000
Announcement for Health Sector 15,000
Sub-Total 1,92,800
Tranche 1
MSMEs 3,00,000
Subordinate debt 20,000
Fund of funds 50,000
EPF support 2,800
Reduction in EPF 6,750
Special Liquidity scheme 30,000
Partial Guarantee Scheme 45,000
DISCOMS 90,000
Reduction in TDS/ TCS 50,000
Tranche 1 total 5,94,550
Tranche 2
Free food grains for migrants 3,500
Interest subvention 1,500
Special credit facility for street vendors 5,000
Housing CLSS for middle income individuals 70,000
Additional emergency working capital for farmers 30,000
Kisan credit cards 2,00,000
Tranche 2 Total 3,10,000
Tranche 3 #
Food micro enterprises 10,000
PM Matsya Sampada Yojana 20,000
Operation Green 500
Agriculture Infra Fund 1,00,000
Animal Husbandry Fund 15,000
Herbal Cultivation 4,000
Beekeeping initiative 500
Tranche 3 Total 1,50,000
Tranche 4 and 5*
Viability gap funding 8,100
MNREGA 40,000
Tranche 4 and 5 Total 48,100
RBI measures 8,01,603
Grand Total 20,97,053
Source: Finance Ministry

*:In presentation for Tranche 4 it was mentioned that Rs 50,000 cr would be outlay for coal sector, Rs 2300 down payment for AAI and
Rs 2000 cr for MRO. However, not mentioned in final presentation today.
#: Excludes Rs 1,50,000 cr which can be spread potentially over the next few years if implemented fully by government and not through
financial system. NABARD could be involved.

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 Economics: Special Economic Package – Part 5

Brief details of announcements under Tranche 5:

1. MGNREGS – increased allocation

• Additional Rs. 40,000 crore under MGNREGS
• It will generate nearly 300 crore person days in total
• Creation of larger of number of durable and livelihood assets including water conservation assets

2. Health and education

A. Health Reforms and Initiative
• Expenditure on public health will be increased
• Increase in investment in grass root health institutions
• All districts will have infections disease hospital blocks
• Public health lab at block level will be established
• National institutional Platform for One Health by ICMR will be promoted
• National Digital Health Blueprint will implemented

B. Technology Driven Education

• PM – eVIDYA program will be launched
• DIKSHA – e-content and QR coded energized textbooks
• One earmarked TV channel one class for 1st to 12th standard
• Extensive use of radio community ratio and podcasts
• Top 100 universities will be permitted for online courses by 30th May 2020
• Manodarpan will be launched for emotional well being
• New National curriculum and Pedagogical framework will be launched
• National Foundational Literacy and Numeracy Mission will be launched by Dec 2020

3. IBC related measures

• Minimum threshold to initiate insolvency proceeding raised to Rs. 1 crore.
• Special insolvency resolution framework will be introduced for MSMEs
• Fresh initiation of insolvency proceedings have been suspended up to one year
• Empowering central govt. to exclude COVID -19 related debts from the definition of default under the code.

4. Decriminalization of companies act defaults

• Violations involving minor technical and procedural defaults has been decriminalized under Companies Act
• Majority of compoundable offenses sections will be shifted to internal adjudication mechanism
• 7 compoundable offences have been drooped and 5 to be dealt with under alternative framework.

5. Ease of doing business for Corporates

• Private companies will be allowed for direct listing in permissible foreign jurisdictions
• Private companies which list NCDs on stock exchange are not be regarded as listed companies
• Power to create additional/specialized benches for NCLAT

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 Economics: Special Economic Package – Part 5

• Small companies, one person companies, producer companies and startup will be levied lower penalties for all
defaults

6. Public Sector Enterprise Policy

• New coherent policy allowing private sector participation in all sectors.
• List of strategic sectors will be notified and at least one PSEs will operational in these sectors
• PSEs will be privatized on non-notified sectors
• In notified strategic sector, number of PSEs will be restricted not more than 4. If there are more than 4 companies
then those will be privatized/merged/brought under holding companies

7. Support to State government

• Fiscal deficit limit of state has been increased from 3% to 5% of GSDP only for FY21 subject to reforms. This will
provide extra resources of Rs. 4.28 lakh crore to the States.
• Borrowings will be partly linked to specific reforms categorized in 4 reforms – One Nation One Ration Card, Ease of
doing business, Power Distribution and Urban Local body revenues
o Ensure sustainability of additional debt
o Promote welfare of migrants and reduce leakage in food distribution
o Increase in job creation through investment
o Safeguard interest of farmers
o Promote urban development, health and sanitation
• Unconditional increase of 0.5% from 3% to 3.5% of GSDP
• From 3.5% up to 4.5% will be released in 4 tranches of 0.25% each which will be linked to measurable and feasible
reform actions
• Remaining 0.5% will be allowed only after achieving 3 out of 4 above mentioned reforms.

CARE’s assessment:

For Tranche 5 of announcements

• The increase in MGNREGA outlay by Rs 40,000 cr is quite good as it can potentially cover 2 crore of migrants who can
take 100 days employment, provided there are projects.
• With flexibility on fiscal deficit subject to conditions, states can undertake additional borrowings
o Potentially, there can be Rs 4.28 lakh crore of borrowing by states which is equivalent to the higher borrowing
of the centre already announced.
o This means if both centre and states go at this target, combined fiscal deficit can be in the region of 11-12%
in FY21.
o For sure there will be more paper in the market which will keep yields up. Prima facie surplus liquidity in
system can match this new demand though any pickup in private credit can create liquidity tightness and
necessitate RBI action.
• Private sector can get into PSE territory which should open up sectors like railways, atomic energy etc.
• IBC laws will be changed in terms of threshold being increased as well as exemption of Covid related cases.
• From the point of view of companies acts, corporates can breathe easily to an extent as several misses have been
de-criminalized.

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 Economics: Special Economic Package – Part 5

• Listing of equity overseas is good, but it needs to be seen how many companies would be in a position to do so.
• Higher spending on health and education would be welcomed as it creates infrastructure in these areas.
For Tranche 1-5 of announcements

The various announcements made in the 5 tranches and the related financing of the same has been detailed in table 3.
Table 3: Amounts associated with various measures and the related government outlay
Any Any implied Outlay by
Amount underwriting investment the
Heading spoken of Who finances of from Central Remarks
: Rs crs government: outside: Rs Governme
Rs crs crs nt : Rs crs
SME credit 3,00,000 Banks, NBFCs 3,00,000 0
SME subordinate debt 20,000 Banks 4,000 CGTSME
Partial by the central Rs.10,000 crs allocation to be incurred in
SME equity 50,000 40,000 10,000
government FY21
Expenditure to be incurred by Central
EPF 2,800 GoI 2,800
Government in FY21
EPF contribution reduced for 3 Reduction in contribution to lead to
6,750 0
Tranche 1 months more in hand income
NBFC/HFC/MFI liquidity 30,000 Banks 30,000 0
Partial credit scheme for NBFCs 45,000 Banks 45,000 0
Funds raised by PFC /REC to carry state
Discoms 90,000 PFC/REC 0
government guarantee
Reduction in rates gives more liquidity.
TDS 50,000 0 But has to be paid anyway as tax rates
not changed.
Expenditure to be incurred by Central
Free food for Migrant Workers 3,500 GoI 3,500 Government in FY21
MUDRA Shishu Loans - Interest Expendtiure to be incurred by Central
Subvention 1,500 GoI 1,500 Government in FY21
Street Vendors - Special Credit
Banks, Fis 0
Facility 5,000
Housing for middle class - Credit Expected to give housing sector a boost
Tranche 2
Linked Subsidy Scheme (CLSS) 0 of Rs.70,000 crs. Government spending
extension 70,000 for the scheme has not been detailed
Allocation from the exisitng CAMPA
6,000
CAMPA Funds for Tribals 6,000 GoI fund.
Farmers through NABARD 30,000 NABARD 0
Government spending for the scheme
Kisan Credit Cards 2,00,000 Banks 0 has not been detailed
Agriculture Infra Fund 1,00,000 GOI or NABARD? 1,00,000 Government or NABARD not known
Formalisation of Micro Food Government spending for the scheme in
Enterprises 10,000 GoI 10,000 FY21 has not been detailed
Fishermen - PM Mastsya Government spending for the scheme in
Sampada Yojana 20,000 GoI 20,000 FY21 has not been detailed
Animal Husbandry Infra Government spending for the scheme in
Tranche 3 Development Fund 15,000 GoI 15,000 FY21 has not been detailed
Government spending for the scheme in
Herbal Cultivation 4,000 GoI 4,000 FY21 has not been detailed
Government spending for the scheme in
Beekeeping 500 GoI 500 FY21 has not been detailed
Government spending for the scheme in
Operation Green 500 GoI 500 FY21 has not been detailed
Coal evacuation infrastructure 50,000 50,000? Details not provided.
Civil Aviation: Spending on
Maintenance, Repair and
Operation (MRO) 2,000 2,000 Details not provided.
Tranche 4
Viability gap funding for social Government and Government spending for the scheme in
infrastructure 8,100 statutory bodies 18,900 8,100 FY21 has not been detailed
Down-payment to Airport
Authority of India 2,300 2,300 Not mentioned in final presentation
Expenditure to be incurred by Central
Tranche 5 MGNREGS 40,000 GoI 40,000 Government in FY21

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 Economics: Special Economic Package – Part 5

The quantum associated with the 5 tranches of the special economic stimulus package announced during May 13-17 amounts
to Rs. 11.75 lakh crore.

Although, the actual outflows from the central government is not clear, as per our calculations, it could be around Rs 1.3 lkh
crore (including coal allocation but not the Rs 1.5 lkh crore of allocations for improving farm infra and related activities). If
coal evacuation expenditure is excluded then the outflows in FY21 could be in the region of Rs. 75,000 -80,000 crores .

For the entire programme which includes what was announced in March the total outlay of the government could potentially
be Rs 1.93 lkh crore plus Rs 0.8 lkh crore which is around Rs 2.73 lkh crore. This excludes the agriculture piece of Rs 1.5 lkh
crore which we believe will happen over time. This would be around 1.2% of fiscal deficit assuming nominal GDP to be around
Rs 224 crore. With our optimistic real GDP forecast of 1.2-1.2% and 4% inflation GDP in nominal terms would be Rs 210 crore
and this stimulus would be 1.3%.

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