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Atmanirbhar Bharat 3.0

  • 17 Nov 2020

  • On 12th November 2020, Government launched Atmanirbhar Bharat 3.0 to boost Covid-hit economy

Aim

  • To boost job creation, provide liquidity support to stressed sectors and encourage economic activity in housing and infrastructure areas.

12 Key announcements under Aatmanirbhar Bharat 3.0

1. Atmanirbhar Bharat Rozgar Yojana

  • It aims to incentivise the creation of new employment opportunities during the COVID-19 recovery phase.
  • The scheme will be effective from 1st October, 2020 and operational till 30th June 2021.

Beneficiaries (new employees) under Scheme

  • Any new employee joining employment in EPFO registered establishments on monthly wages less than Rs.15000/.
  • EPF members drawing monthly wage of less than Rs.15000/- who made exit from employment during COVID Pandemic from 01.03.2020 to 30.09.2020 and is employed on or after 01.10.2020

Eligibility Criteria

Establishments registered with EPFO if they add new employees compared to reference base of employees as in September, 2020. Scheme to be operational till 30th June 2021-

  • Establishments, with up to 50 employees, would have to add a minimum of two new employees.
  • The organisations, with more than 50 employees, would have to add at least five employees.

Subsidy Support from Central Govt.

  • Establishments employing up to 1000 employees: Employee’s contributions (12% of Wages) & Employer’s contributions (12% of wages) totalling 24% of wages.
  • Establishments employing more than 1000 employees: Only Employee’s EPF contributions (12% of EPF wages).
  • The subsidy support to get credited upfront in Aadhaar seeded EPFO Account (UAN) of eligible new employees.

2.Emergency Credit Line Guarantee Scheme

  • It is for MSMEs, businesses, MUDRA borrowers, and individuals (loans for business purposes).
  • Under this credit scheme, banks will be able to lend to stressed sectors from 26 sectors identified by the K.V. Kamath committee.
  • The new scheme will have a 1-year moratorium and 5 years of repayment.

3. Atmanirbhar Manufacturing Production-linked incentives for 10 Champion Sectors

  • 10 more Champion Sectors will be covered under the Production Linked Incentives Scheme to help boost the competitiveness of domestic manufacturing.
  • Ten Sectors–Advance Cell Chemistry Battery, Electronic/Technology Products, Automobiles & Auto Components, Pharmaceuticals Drugs, Telecom & Networking Products, Textile Products, Food Products, High Efficiency Solar PV Modules, White Goods (ACs & LED) & Specialty Steel.
  • This will give a big boost to the economy, investment, exports and job creation.

4. PM Awas Yojana - Urban

  • A sum of Rs. 18000 crore is being provided for PMAY- Urban over and above Rs. 8000 crore already allocated this year.
  • This will help ground 12 Lakh houses and complete 18 Lakh houses, create additional 78 Lakh jobs and improve production and sale of steel and cement, resulting in a multiplier effect on the economy.
  • PMAY - Urban Mission was launched in 2015 with an intention to provide housing for all in urban areas by year 2022.

5. Support for Construction & Infrastructure – Relaxation of Earnest Deposit Money & Performance Security on Government Tenders

  • To provide ease of doing business and relief to contractors whose money otherwise remains locked up, performance security on contracts has been reduced from 5-10% to 3%.
  • It will also extend to ongoing contracts and Public Sector Enterprises.
  • EMD for tenders will be replaced by the Bid Security Declaration. The relaxations in the General Financial Rules will be in force till December 31, 2021.

6. Income Tax relief for Developers & Home Buyers

  • The differential between circle rate and agreement value in real estate income tax under Section 43 CA of IT Act has been increased from 10% to 20%.
  • This is for the primary sale of residential units up to Rs 2 Crore (from date of announcement of this scheme, till June 30 2021).
  • Consequential Relief up to 20% shall also be allowed to buyers of these units under section 56(2)(x) of the IT Act for the said period.
  • Income Tax relief provides incentives to the middle class to buy homes.

7. The Platform for Infra Debt Financing

  • The government will make Rs 6,000 Crore equity investment in the debt platform of the National Investment and Infrastructure Fund (NIIF).
  • It will help NIIF provide a debt of Rs. 1.1 Lakh Crore for infrastructure projects by 2025.

8. Support for Agriculture

  • As fertilizer consumption is going up significantly, Rs. 65,000 Crore is being provided to ensure an increased supply of fertilizers to farmers to enable the timely availability of fertilizers in the upcoming crop season.

9. Boost for Rural Employment

  • An additional outlay of Rs.10, 000 Crore is being provided for PM Garib Kalyan Rozgar Yojana to provide rural employment.
  • This will help accelerate the rural economy.

10. Boost for Project Exports

  • Rs. 3,000 Crore boost is being provided to EXIM Bank for promoting project exports under Indian Development and Economic Assistance Scheme (IDEAS Scheme).
  • It will help EXIM Bank facilitate Lines of Credit development assistance activities and promote exports from India.

11. Capital and Industrial Stimulus

  • Rs.10, 200 Crore additional budget stimulus is being provided for capital and industrial expenditure on domestic defense equipment, industrial infrastructure, and green energy.

12. R&D Grant for COVID Vaccine

  • Rs. 900 Crore is being provided to the Department of Biotechnology for Research and Development of Indian COVID Vaccine.

Significance

  • These measures provided by the government reinforce the ‘fiscal conservatism’ ideology of the government — rather than large cash transfers, the growth philosophy centres around creating an ecosystem that aids domestic demand, incentivises companies to generate jobs and boost production, and simultaneously extends benefits to those in severe distress, be it firms or individuals.

Analysis

  • As per the government, the total stimulus announced by the Government and Reserve Bank of India (RBI) till date (including Atmanirbhar 1.0 and Atmanirbhar 2.0), to help the nation tide over the Covid-19 pandemic, works out to Rs. 29.87 lakh crore, which is 15% of national GDP.
  • Out of this, the stimulus worth 9% of GDP has been provided by the government.
  • While the fiscal stimulus has been small, monetary policy has been extremely accommodative.
  • The focus should extend from announcement of reforms to their effective implementation.
  • Also, nurturing an environment of policy certainty with regard to taxes, foreign direct investment rules and payment of dues to small businesses can have a meaningful impact on kick-starting the private capital spending cycle.
  • The economic rebound from the debilitating impact of the Covid-19 pandemic seems stronger than what most analysts had predicted.
  • The estimates for the fourth quarter gross domestic product (GDP) have already been upgraded by many institutions. The government will hope that the green shoots visible in the high-frequency data further translate into GDP uplift.
  • The measures announced under Atmanirbhar Bharat 3.0 – pragmatic and specific – should help towards that cause.