PM Narendra Modi announces ₹20 lakh crore economic package

Amidst the COVID-19 Pandemic and the economic panic, Prime Minister Narendra Modi announced a Rs 20 lakh crore package which is 10% of India’s GDP. He also stated that the 21st century belongs to India and it is the time for us to become self-reliant for which we must focus on the following 5 pillars:

  • Economy
  • Infrastructure
  • System
  • Demography
  • Demand

The economic package will cover different aspects of the economy including Agriculture, MSMEs, Industries, common man, laborers and different vulnerable sections of the economy.

The focus on economic package will make India self-reliant through developing local supply chains, strengthening local supply chains as during the lockdown the importance of local supply chains and retailers came to highlight. Modi called this a 20-20 package, Rs 20 Lakh Cr package in the year 2020. PM Modi emphasised on “Aatma Nirbhar Bharat” meaning Self-Reliant India, where Indians must focus on strengthening local products & services, strengthen local supply chains.

(A) MSME Measures of the Economic Package to fight for COVID-19 Crisis

Union Finance Minister, Smt. Nirmala Sitharaman said the focus would be on land, labour, liquidity and law and also the measures focused on getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment.

Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to the real estate sector were also covered.

Following are the important measures announced:

 1.Rs 3 lakh crore Emergency WC Facility for Businesses, including MSMEs:

To provide relief to business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will  not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

 2.Rs 20,000 Crore Subordinate Debt for Stressed MSMEs

Provision made for Rs. 20,000 Cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

 3.Rs 50,000 Crores equity infusion through MSME Fund of Funds

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

 4.New definition of MSME

Definition of MSME will be revised by raising the Investment limit. An additional criteria of  turnover also being introduced. The distinction between the manufacturing and service sector will also be eliminated.

Existing and Revised Definitions of MSMEs                          

Existing Classification of MSME

Criteria: Investment in plant and machinery for manufacturing / equipment for service
Classification Micro Small Medium
Manufacturing Enterprise <Rs 25 lakh <Rs 5 crore <Rs 10 crore
Service Enterprise <Rs 10 lakh <Rs 2 crore <Rs 5 crore


Revised Classification of MSME

Composite Criteria: Investment and Annual Turnover
Classification Micro Small Medium

& Services

Investment <Rs 1 crore &

Turnover < Rs 5 crore

Investment <Rs 10 crore &

Turnover < Rs 50 crore

Investment <Rs 20 crore &

Turnover < Rs 100 crore

 5.Other Measures for MSME

E-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.

(B) Measures for migrant workers, farmers, street vendors as part of Economic Package to fight for COVID-19 Crisis
1. In a big move, the government extended the credit linked subsidy scheme (CLSS) till March 2021 for middle income group people (annual income of Rs 6-18 lakhs). This will lead to investment of over Rs 70,000 crore in housing and will stimulate demand for steel, cement, transport and other construction materials.

2. Rs 2 lakh crore concessional credit boost for farmers through Credit Cards. This special drive will provide concessional credit to PM-KISAN beneficiaries. Fishermen and animal husbandry farmers will also be included in this drive. This will enable such farmers to gain access to institutional credit at concessional interest rate. 2.5 crore farmers will be covered.

3.Rs 30,000 crore additional emergency working capital funding for farmers through NABARD inadequate financial resources with small and marginal farmers. Regional Rural Banks (RRBs) and Rural Cooperative banks are main source for credit. NABARD will extend additional refinance support of Rs 30,000 crore for crop loan requirement of Rural Co-op Banks & RRBs. This is over and above 90,000 crores to be provided by NABARD through the normal refinance route during this year. Front-loaded on-tap facility to 33 State Co-operative banks, 351 District Co-operative banks and 43 RRBs available on tap based on their lending. This will benefit around 3 crore farmers – mostly small and marginal fanners. This will meet post-harvest (Rabi) & current Kharif requirement in May/June.

4. To create job opportunities for Tribals /Adivasis, plans worth Rs 6000 crore will be approved shortly under Compensatory Afforestation Management & Planning Authority (CAMPA) funds. The funds would be used by the state government for afforestation and plantation works, forest management and forest protection.

5. FM announced a Rs 5,000 crore special credit for all street vendors. The government will launch a special scheme within a month to facilitate easy access to credit to street vendors. An estimated 50 lakh street vendors will be able to avail the special credit facility and it will provide an initial working capital of up to Rs 10,000. Digital payments will be incentivized through monetary rewards and enhanced working capital credit would be made available for good repayment behavior, FM said.

6. Further, the government announced 2% interest subvention for on loans up to Rs 50,000 given under MUDRA Shishu scheme for a period of 12 months. The total relief will be worth Rs 1,500 crore to Mudra Shishu loanees. The current portfolio of MUDRA-Shishu loans is 1.62 lakh crore (maximum loan amount of Rs 50,000).

7. Sitharaman announced affordable rental housing for migrants and urban poor, to be launched under PM Awas Yojana. With this, urban poor and migrants can look forward to having some basic accommodation for themselves. Affordable accommodation for migrants and urban poor will be provided through conversion of government housing in cities to affordable rental housing complexes (ARHC). The government will also incentivize industries along with state government and central government agencies/organizations to develop ARHC on their private land and operate.

8. FM announced that free food grains will be provided to migrants for the next two months and Rs 3,500 crore will be spent on this intervention. The state governments will be responsible for implementation, identification of migrants and full distribution.

9. As a part of the Prime Minister’s technology driven system reforms, the government announced a ‘one nation, one ration card’ scheme. This scheme will enable a migrant beneficiary to access public distribution system (PDS) from any fair price shop in the country. National portability will cover 67 crore beneficiaries (or 83% of the PDS population) in 23 states by August this year and 100% national portability will be achieved by March 2020, FM added.

(C) Economic Package for agriculture infra, reforms in law to increase farmers’ income announced.
Finance Minister Nirmala Sitharaman on Friday announced the third tranche of stimulus package aimed at reviving the pandemic-hit economy, which focused on agriculture and allied activities.

1. Sitharaman announced allotment of Rs 1 lakh crore for aggregators, FPOs, primary agricultural cooperative societies, farmer produce organization and start-ups, all aimed at strengthening the farmgate infrastructure and increasing farmers’ income. This fund would help in reaching untapped export markets in view of improved health consciousness.

2. Rs 10,000 crore scheme for Micro food enterprises, promoting PM Modi’s vision of ‘vocal for local with global outreach’, will have cluster-based approach (for example – mango in UP, Kesar in J&K, bamboo shoots in North-East, Chilli in Andhra Pradesh Tapioca in Tamil Nadu etc.). The scheme will help 2 lakh MFEs with technical upgradation to attain FSSAI food standards, build brands and marketing.

3. All COVID19 related deadline extensions relating to fisheries activities, many of them involving overseas contracts, have been honoured. Very many measures which will help marine and coastal farmers have been undertaken as promised.

4. Government to launch the Rs 20,000 crore Pradhan Mantri Matsya Sampada Yojana for development of marine and inland fisheries. 55 lakh people expected to get employment from this program.

5. National Animal Disease Control Programme of Rs 13,343 crore to ensure 100 per cent vaccination of cattle, buffalo, sheep, goat and pig population, which is a total of 53 crore, for Foot and Mouth Disease and Brucellosis.

6. Setting up of Animal Husbandry infrastructure development fund of Rs 15,000 crore, aimed at supporting private investment in dairy processing, value addition and cattle feed infrastructure.

7. Rs 4000 crore allocated for promotion of herbal cultivation. 10,00,000 hectares will be covered under herbal cultivation in next two years. The scheme will lead to Rs 5,000 crore income generation for farmers. National Medicinal Plants Board (NMPB) will bring 800-hectare area by developing a corridor of medicinal plants along the banks of river Ganga.

8. Govt to implement a Rs 500 crore scheme of infrastructure development related to integrated beekeeping development centers, collection, marketing and storage centers, post-harvest and value addition facilities. The scheme will lead to an increase in income of 2 lakh beekeepers.

9. From ‘TOP’ to TOTAL scheme worth Rs 500 crore – Operation Greens to be extended from Tomatoes, Onions and Potatoes (TOP) to all fruits and vegetables (TOTAL).

10. Amendment in Essential Commodities Act, 1955, aimed at increasing farmers’ income. Agriculture food items including cereals, edible oils, oil seeds, pulses, onions and potato to be deregulated. Stock limit to be imposed under very exceptional calamities, famine with surge in prices.

11. A central law to be formulated to provide adequate choices to the farmers to sell produce at an attractive price, barrier-free interstate trade and framework for e-trading of agricultural produce.

Note: We have covered this news for the benefit of our visitors. This piece of news has been collected from various news sources and reported as stated, we request you to kindly check for additional details if you need more inforamtion on any particular point.


While at this, do you remember our blog post that spoke of Future Challenges for Indian Banks? 

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