Atmanirbhar Bharat Package 3.0: An add-on boost to strengthen the economy

In a significant move to boost employment during COVID-19 recovery, the government of India announced the third leg of its Atmanirbhar Bharat stimulus package on 13^th November 2020, focussed on creating employment opportunities and aid in the revival of businesses. The Atmanirbhar Bharat 3.0 stimulus is approximately Rs 2.65tn considering even the Rs 1.46tn of the Production Linked Incentives (PLI) schemes. An additional outlay of Rs 650 billion is being provided as a fertiliser subsidy to support increasing demand. This latest slew of initiatives encourages job creation in the informal sector, expands the supply of loanable funds through enlargement of credit guarantee scheme to support stressed sectors and a strong push to real estate, with tax incentives for home buyers that could potentially unleash a price discovery in the real estate. Rural development is key to the growth of any economy. The GOI also seeks to enlarge the rural employment scheme that could continue to support rural recovery. All-in-all these measures will ensure that India takes steps towards a sustained economic recovery.

• Atmanirbhar Bharat Rozgar Yojana: Aimed at incentivising the creation of new employment opportunities, the government will provide subsidy for PF contribution for adding new employees to establishments registered with the Employees’ Provident Fund Organisation (EPFO). Organisations with up to 1000 employees will receive both employees’ and employer’s contribution which would be 12% of wages each, totalling 24% of wages for 2 years. Employers with more than 1,000 employees will get employees’ contribution of 12% for two years.
• Emergency Credit Line Guarantee Scheme (ECLGS): Catering to the healthcare and 26 other stressed sectors, the ECLGS 2.0 scheme was launched under the aegis of Atmanirbhar Bharat 3.0. These entities will get additional credit up to 20% of outstanding credit with a tenor of 5 years, including a 1-year moratorium on principal repayment. This scheme will greatly benefit the MSME sector by lowering the financial stress on them.

The Atmanirbhar Bharat 3.0 stimulus was announced in November of a value of approximately Rs 2.65tn

• Additional Outlay for PM Awas Yojana (Urban): Over and above the Rs 8000 crore allocated to PM Awas Yojana (PMAY) in the previous Atmanirbhar Bharat stimulus packages 1.0 & 2.0, an additional Rs 180 billion has been provided for the same. This will help ground 1.2 million houses and complete 1.8 million houses, thereby creating 7.8 million jobs and bolster the production and sale of steel and cement, having a positive effect on the economic growth. Initiated in 2015, the PMAY aims to provide housing for all in urban areas by the year 2022.
• Relaxation of Earnest Deposit Money & Performance Security on Government Tenders: Performance security deposit on contracts has been reduced to 3% from around 5-10% while Earnest Deposit Money (EMD) w ill not be required. These relaxations provided till 31^st December 2021, will be a major relief to the construction sector and enhance the capabilities of contractors to carry out any project.
• Income Tax relief for Developers and Home Buyers: Developers have been allowed to sell their housing units at 20% lower than the circle rate, benefitting the primary sale of residential units.
• Infra Debt Financing: The government aims to make Rs 60 billion equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF provide a debt of Rs 1.1 trillion for infrastructure projects by 2025.
• Boost for Rural Employment: Bolstering the rural development and economy, an additional outlay of Rs 100 billion is provided for the PM Garib Kalyan Rozgar Yojana to provide rural employment.
• Boost for Project Exports: Rs 3,000 crore boost is being given to EXIM Bank for promoting project exports under the Indian Development and Economic Assistance Scheme (IDEAS) Scheme.
• Capital and Industrial Stimulus: Rs 102 billion additional budget stimulus is being provided for capital and industrial expenditure on domestic defence equipment, industrial infrastructure, and green energy.
• R&D grant for COVID Vaccine: Rs 9 billion is being provided to the Department of Biotechnology for R&D of Indian COVID Vaccine.

The government of India’s philosophy revolves around creation of an ecosystem that aids domestic demand, encourages companies to generate jobs and augment production, benefitting those under severe stress afflicted by the pandemic, emphasising the financial conservationism dogma. These measures follow a multi-pronged approach aimed at generating employment and encouraging formalisation of workforce in urban areas, expanding the scope of distress employment provided in rural areas, easing the flow of credit to stressed parts of the economy, expanding the incentives offered to boost domestic manufacturing and kickstarting the real estate cycle, among others. 

Till date the Government of India and Reserve Bank of India (RBI), have provided a total stimulus of Rs 29.87 billion to assist in the rehabilitation and recovery of the pandemic inflicted economy. This amounts to 15% of the nation’s GDP, out of which 9% is provided by the government. With the post-COVID recovery in its very nascent stage, this additional stimulus Atmanirbhar Bharat 3.0, will indeed strengthen the economic recovery.