Fifth set of measures under the Atmanirbhar Bharat AbhiyanApprox Read Time: 7 minutes
In News: Fifth set of measures under COVID-19 Package
- Union Finance Minister has announced the fifth set of measures under the Atmanirbhar Bharat Abhiyan.
- The fifth set of measures under the Atmanirbhar Bharat Abhiyan announced are related to MGNREGS, Health and Education related, de-criminalisation of Companies Act, Ease of Doing Business, Public Sector Enterprises- related steps and state governments and related resources.
- The final picture shows that of the ₹20.97 lakh crore stimulus package — which amounts to 9.8% of GDP — only ₹2.2 lakh crore can be traced as direct additional budgetary cost to the Central exchequer, while another ₹1.55 lakh crore relates to already budgeted expenditures.
- The remaining 85% comes from the RBI’s liquidity announcements, credit guarantee schemes and insurance schemes, apart from the structural reforms which are not really stimulus or relief measures.
- Some analysts felt that this amounted to double counting as the credit guarantee schemes to support small companies and non-banking finance companies would also tap into the RBI’s measures.
- Responding to criticisms, the government has said that this is a part of a well thought out strategy and that it wants to be fiscally responsible instead of spending money wastefully.
Announcements in the Health and Education sector:
- For the health sector, the Government promised increased public expenditure including infectious disease hospital blocks in every district and public laboratories in every block, without mentioning any specific financial outlay.
- Further, there will be an increase in research in the health domain along with the implementation of the National Digital Health Blueprint.
- The Centre will also roll out the PM e-Vidya programme for multi-mode access to digital education, including e-content for school education, and a TV channel each for classes from 1 to 12.
- For students hit by the pandemic, top 100 universities would be automatically permitted to start online courses by May 30, 2020.
- An initiative for psycho-social support for students, teachers and families for mental health and emotional well-being, known as Manodarpan, will be launched immediately.
New Public Sector Enterprise Policy:
- The Finance Minister also unveiled the government’s plan to limit the role of public sector companies across the economy.
- The government will soon announce a new policy for public sector enterprises which will pave the way for the entry of private companies in all sectors where state-run firms are present.
- Even in the strategic sectors, PSU presence will be limited to 1-4 entities, while in the other segments of the economy, the companies would be privatized, merged or brought under holding companies.
- However, experts have criticized the new Public Sector Enterprise Policy, noting that privatizing PSUs would find fewer buyers at a time of global recession.
- Moreover, any potential buyer would be spending money which could have gone into fresh investment on a financial transfer instead, effectively contracting demand.
Changes to IBC/companies act:
- Changes to the Insolvency and Bankruptcy Code (IBC) as well as the Companies Act were proposed to help small and medium businesses.
- As part of this, debt incurred by companies on account of coronavirus would not be included in the category of defaults and no fresh insolvency proceedings would be initiated for a year.
- Apart from changing the norms for triggering of insolvency, the minimum default threshold to initiate proceedings under the Insolvency and Bankruptcy Code (IBC) has been raised from Rs 1 lakh to Rs 1 crore, an attempt aimed at giving relief to MSMEs.
- Companies would be allowed to directly list securities in permissible foreign jurisdictions and listings for non-convertible debentures, however, such companies will not be treated as listed companies.
Decriminalization of provisions under the Companies Act:
- There will be decriminalization of the Companies Act in violations involving minor technical and procedural defaults including shortcoming in CSR reporting, inadequacies in board reports, filing defaults and delay in holding AGMs.
- A majority of the compoundable offences sections will be shifted to internal adjudication mechanism (IAM), which will help to de-clog the criminal courts and NCLT.
- Further, seven compoundable offences under the Companies Act will be dropped altogether and five will be dealt with under an alternative framework.
Increase in borrowing limit of States:
- State governments have been given more fiscal room in the current crisis with the hiking of their borrowing limits from 3% to 5% of Gross State Domestic Product (GSDP), which is particularly important as GSDPs are likely to contract.
- However, the hiked limits will be conditional on States implementing reforms related to ration portability, ease of doing business, power distribution, and urban local bodies.
- It is estimated that the increase in borrowing limits would make extra resources worth ₹4.28 lakh crore available to States.
- Also, States have so far borrowed only 14 percent of the limit which is authorized for them and 86 percent of the limit remains unutilized.
- It has been pointed by analysts that since the Centre’s cost of borrowing (6%) is lower than that of States, it would have been better for the Centre to borrow from the market and transfer the funds to States.
Way Ahead for Self-Reliant sectors:
- Prime Minister’s push for self-reliance has brought back the government’s focus on improving quality and increasing production in various sectors.
- As per data by the Commerce Ministry, India imported $467.2 billion worth of commodities between April and March 2019-2020. India also imported electronic goods worth $54.5 billion and medicinal or pharmaceutical products worth $6.7 billion.
- Footwear and non-footwear leather, furniture, gems and jewellery, capital goods and machinery, mobile and electronics, pharmaceuticals, textiles, garments and manmade fibres are some of the sectors where India has a natural advantage and potential to be a strength for the country.
- The government, which identified these industries and several others as having “unnecessary” imports, plans to improve the quality of domestically made products and discourage these imports by providing more incentives, focus and handholding for these sectors.
- Industry experts have underlined the need to create conditions for domestic producers to manufacture efficiently so that they can be competitive.
- A well-articulated industrial policy framework that provides at least a medium-term perspective for the manufacturing sector will be useful in this regard.