Atmanirbhar Bharat Abhiyan Challenges & Impacts
What is Atmanirbhar Bharat Abhiyan?
Atmanirbhar means ‘self-reliant’. On May 12, Prime Minister Narendra Modi announced in his address to the nation an economic package of Rs 20 trillion to tide over the coronavirus crisis under the Atmanirbhar Bharat Abhiyan. He said the economic package would play an important role in making India ‘ self-reliant’ and that it would benefit laborers, farmers, honest taxpayers, MSMEs, and the cottage industry.
India’s Atmanirbhar Bharat Abhiyan (self-reliance) will be based on five pillars.
Atmanirbhar Bharat Abhiyan Challenges & Impacts On India
Atmanirbhar Bharat Abhiyan Challenges
Issues Related to Liquidity: The package of Rs 20 lakh crore comprises both fiscal and monetary measures, the latter being in the nature of credit guarantees and liquidity infusions into banks and other financial sector institutions rather than the economy per se.
- The majority of the package is liquidity measures that are supposed to be transmitted by RBI to Banks and Banks to Citizens. This transmission wouldn’t be as smooth owing to the inefficient transmission of monetary policy.
Burgeoning Fiscal Deficit: The government is not raising its total expenditure. The total expenditure-as shown by many calculations- is only 1% of the GDP under Atmanirbhar Bharat, far from its promise of 10%. The State Bank of India has in its Ecowrap newsletter pegged the actual size of the fiscal package at ₹2 lakh crore or 1 percent of the GDP.
credit infusion: It is contended that the package relies heavily on credit infusion without realizing that the investment may not pick up in the near future. As the consumer will try to contain discretionary expenditures like cars, tourism, the overall demand will be lower.
Lack of Demand: The lockdown has lowered aggregate demand, and a fiscal stimulus is needed. However, the package, by relying overwhelmingly on credit infusion to boost the economy, has failed to recognize that investment will pick up only when people across income segments have money to spend.
Atmanirbhar Bharat Abhiyan Impacts
1. On Businesses including MSMEs :
- Collateral free loans for businesses: All businesses (including MSMEs) will be provided with collateral-free automatic loans of up to three lakh crore rupees. MSMEs can borrow up to 20% of their entire outstanding credit as on February 29, 2020, from banks and Non-Banking Financial Companies (NBFCs). Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible for such loans and can avail the scheme till October 31, 2020. Interest on the loan will be capped and a 100% credit guarantee on principal and interest will be given to banks and NBFCs.
- Corpus for MSMEs: A fund of funds with a corpus of Rs 10,000 crore will be set up for MSMEs. This will provide equity funding for MSMEs with growth potential and viability. Rs 50,000 crore is expected to be leveraged through this fund structure.1
- Subordinate debt for MSMEs: This scheme aims to support to stressed MSMEs that have Non-Performing Assets (NPAs). Under the scheme, promoters of MSMEs will be given debt from banks, which will be infused into the MSMEs as equity. The government will facilitate Rs 20,000 crore of subordinated debt to MSMEs. For this purpose, it will provide Rs 4,000 crore to the Credit Guarantee Fund Trust for Micro and Small Enterprises, which will provide partial credit guarantee support to banks providing credit under the scheme.1
- Schemes for NBFCs: A Special Liquidity Scheme was announced under which Rs 30,000 crore of investment will be made by the government in both primary and secondary market transactions in investment-grade debt paper of Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs)/Micro Finance Institutions (MFIs). The central government will provide a 100% guarantee for these securities. The existing Partial Credit Guarantee Scheme (PCGS) will be extended to partially safeguard NBFCs against borrowings of such entities (such as primary issuance of bonds or commercial papers (liability side of balance sheets)). The first 20% of loss will be borne by the central government. The PCGS scheme will facilitate liquidity worth Rs 45,000 crores for NBFCs.1
- Employee Provident Fund (EPF): Under the PM Garib Kalyan Yojana, the government paid 12% of employer and 12% of employee contribution to the EPF accounts of eligible establishments for the months of March, April and May. This will be continued for three more months (June, July, and August). This is estimated to provide liquidity relief of Rs 2,500 crore to businesses and workers.
- Statutory PF contribution: Statutory PF contribution of both the employer and employee will be reduced from 12% to 10% each for all establishments covered by EPFO for the next three months. This scheme will apply to workers who are not eligible for the 24% EPF support under PM Garib Kalyan Package and its extension. However, Central Public Sector Enterprises (CPSEs) and State Public Sector Units (PSUs) will continue to contribute 12% as an employer contribution.
- Street vendors: A special scheme will be launched within a month to facilitate easy access to credit for street vendors. Under this scheme, bank credit will be provided to each vendor for initial working capital.
2. On Poor, including migrants and farmers
- Concessional Credit Boost to farmers: Farmers will be provided institutional credit facilities at concessional rates through Kisan Credit Cards. This scheme will cover 2.5 crore farmers with concessional credit worth two lakh crore rupees.2
- Agri Infrastructure Fund: A fund of one lakh crore rupees will be created for the development of agriculture infrastructure projects at farm-gate and aggregation points (such as cooperative societies and Farmer Producer Organizations). Farmgate refers to the market where buyers can buy products directly from the farmers.
- Emergency working capital for farmers: An additional fund of Rs 30,000 crore will be released as emergency working capital for farmers. This fund will be disbursed through NABARD to Rural Cooperative Banks (RCBs) and Regional Rural Banks (RRBs) for meeting their crop loan requirements. This fund is expected to benefit three crore small and marginal farmers. This is in addition to the financial support of Rs 90,000 crore that will be provided by NABARD to RCBs and RRBs to meet the crop loan demand this year.2
- Support to fishermen: The Pradhan Mantri Matsya Sampada Yojana (PMMSY) will be launched for integrated, sustainable, and inclusive development of marine and inland fisheries. Under this scheme, Rs 11,000 crore will be spent on activities in Marine, Inland fisheries and Aquaculture and Rs 9,000 crore will be spent for developing infrastructure (such as fishing harbours, cold chain, markets).4
- Animal Husbandry infrastructure development: An Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore will be set up, with the aim of supporting private investment in dairy processing, value addition, and cattle feed infrastructure. Incentives will be given for establishing plants for the export of niche dairy products.4
- Employment push using CAMPA funds: The government will approve plans worth Rs 6,000 crore under the Compensatory Afforestation Management and Planning Authority (CAMPA) to facilitate job creation for tribals/Adivasis. Funds under CAMPA will be used for: (i) afforestation and plantation works, including in urban areas, (ii) artificial regeneration, assisted natural regeneration, (iii) forest management, soil and moisture conservation works, (iv) forest protection, forest, and wildlife-related infrastructure development, and wildlife protection and management. Note that the CAMPA funds are currently used for the protection of forest and wildlife management.