Sitharaman announces £1.7trillion package for poor hit by lockdown


NEW DELHI : India rolled in 1.7 trillion aid packages worth about 1% of GDP in an aggressive attempt to limit the economic damage caused by the coronavirus outbreak and to address the livelihoods of millions of poor people impacted by an unprecedented May 21 nationwide lockdown days are affected.

The aid package under newly appointed Prime Minister Garib Kalyan Yojana aims to alleviate the financial woes of migrant workers, farmers, the urban and rural poor and women.

As part of the lockdown to stem the spread of the deadly virus, the government has halted public transport, airlines and construction, halted most economic activity and left millions of informal economy workers without a livelihood.

“We don’t want anyone to go hungry. We will address the protein needs of the poor and put money into their hands through direct transfers,” Finance Minister Nirmala Sitharaman said at a news conference on Thursday.

Asked if more such measures are expected, Sitharaman said the latest announcements are for those who need help immediately. “If things develop, we will come back,” she added. However, Sitharaman did not say if this was the case 1.7 trillion is fresh money pumped into the economy or earmarked by recalibrating existing systems.

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About 800 million people will get 5 kg of wheat or rice for free every month for the next three months, on top of the 5 kg they already get.

The latest measures come two days after Sitharaman announced a series of relaxations for businesses, easing tax compliance and bankruptcy rules to help businesses and workers deal with the fallout from the coronavirus pandemic.

Sitharaman said about 2.2 million health professionals on the front lines of fighting the Covid-19 outbreak, including doctors, nurses, ASHA workers, paramedics and sanitation workers, will receive health insurance coverage 50 lakhs per person. About 800 million people will get 5 kg of wheat or rice for free every month for the next three months, on top of the 5 kg they already get. In addition, 1 kg of legumes per household will be distributed for three months.

Sitharaman made a series of money transfer announcements for various sections of society and said as part of the PM Kisan program, the first installment of 2,000 will be transferred to the accounts of 86.9 million farmers in April. The scheme provides 6,000 per year to eligible farmers. Regular wages will be increased under MGNREGA 182 per day too 202 per day, benefiting 50 million families. The wage increase is expected to result in an additional income of 2,000 per worker. A lump sum to eligible seniors, widows and the disabled 1,000 will be sent in two installments over the next three months, benefiting 30 million people.

Aditi Nayar, chief economist at Icra Ltd, said announcements regarding cash transfers appear relatively modest at this point. “Accordingly, we now expect the impact of social distancing and lockdown restrictions to limit GDP growth to 2.4% in Q4 FY20 and a marginal 0.5% in Q1 FY21, despite support from government spending will. As a result, we expect annual GDP growth to moderate to 4.2% in FY2021 from 4.4% in FY2020,” she added.

Women, who often have fewer economic decisions to make, benefit greatly from the announcements. A one-time transfer of 500 per month will be made into Jan Dhan’s accounts of 200 million women for the next three months. Women from 83 million BPL families will be provided free cylinders of cooking gas for three months as part of the Ujjwala scheme. Unsecured loans to women’s self-help groups have also been doubled 20 lakh for 6.3 million such groups, which will benefit 70 million households.

Addressing the concerns of workers in the organized sector who are at risk of losing their jobs due to the closure, Sitharaman said the government will cover the cost of provident fund contributions, both employer and employee – 12% each the next three years carry months for establishments with up to 100 employees, 90% of whom earn less than 15,000 per month as salary. Provident fund rules will be amended to allow a 75% non-refundable advance from the provident fund for contingency expenses or three months’ wages, whichever is less, benefiting 48 million workers.

Ranen Banerjee, head at PwC India, said the announcements would take pressure off employers and curb layoff pressure in small units, putting money in workers’ hands to weather a lean quarter until operations resume.

The central government will instruct the state governments to share the existing welfare fund 31,000 crore reserves to support 35 million construction workers to protect them from economic disruption.

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Highlights of the economic relief package for those affected by the lockdown:

  • Frontloaded income support for 86.9 million farmers
  • Increase in wages under MGNREGA benefiting 50 million families
  • One-time payment of 1,000 to the elderly, widows, the disabled
  • Getting 200 million women with no-frills bank air conditioners 500 for the next 3 months
  • 80 million households should be able to refill gas cylinders free of charge for 3 months
  • Government pays 24% EPFO ​​contribution from workers and companies for 3 months
  • 50 lakh health insurance coverage for healthcare workers
  • 35 million construction workers benefit from a 31,000 cr fund
  • District mineral funds to be used for testing and screening

Gireesh Chandra Prasad contributed to this story.

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