Aatma Nirbhar Bharat

(Self-Reliant India)

by

VIVEK SINGH
For all economy related updates, follow the Telegram Channel
“Vivek Singh Economy”

Specifically designed for Civil Services Exam

This document is a detailed note which covers every aspect of “Aatma Nirbhar Barat”
package announced by the Govt. of India in five parts in May 2020. Rather than
dividing this document into five parts from 1 to 5, I have divided into different
sections for your easy understanding and keeping in mind the way questions are
asked in the exam.This document will be useful for prelims, mains and interview.

The sections are:

 Introduction
 Schemes
 Reforms
 Additional measures
 RBI Measures to ease liquidity
 Conclusion/Impact

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INTRODUCTION
Corona has resulted in one of the biggest and most unprecedented crises that the world is
grappling today. It has impacted almost every country on the earth infecting more than 1.2
crore people and causing 6 lakh deaths. World all over is engaged in a battle to save
precious lives.

As a nation today we stand at a very crucial juncture. Such a big disaster is a signal for
India and it has brought a message and an opportunity for India. For example, when the
Corona crisis started, there was not a single PPE kit made in India. The N-95 masks were
produced in small quantity in India. Today we are in a situation to produce 2 lakh PPE and
2 lakh N-95 masks daily and we are exporting it too. We were able to do this because India
turned this crisis into an opportunity.

We have been hearing since the last century that the 21st century belongs to India. We
have seen how the world was before Corona and the global systems in detail. When we look
at these two periods from India's perspective, it seems that the 21st century is the century
for India. This is not our dream, rather a responsibility for all of us. The state of the world
today teaches us that a (AtmaNirbhar Bharat) "Self-reliant India" is the only path.

But, today the meaning of the word self-reliance has changed in the global scenario. The
debate on Human Centric Globalization versus Economy Centralized Globalization is
on. India's fundamental thinking provides a ray of hope to the world. The culture and
tradition of India speaks of self-reliance and the soul is VasudhaivaKutumbakam.

India does not advocate self-centric arrangements when it comes to self-reliance. India's
self-reliance is ingrained in the happiness, cooperation and peace of the world.

This is the culture which believes in the welfare of the world, for all the living creatures and
the one which considers the whole world as a family. Its premise is 'माता भूममिः पुत्रो अहम् पृमिव्यिः'
(land is our mother and we are her son)-the culture that considers the earth to be the
mother. And when the Bharat Bhumi, becomes self-sufficient, it ensures the possibility of a
prosperous world. India's progress has always been integral to the progress of the world.

India's goals and actions impact the global welfare. When India is free from open
defecation,it has an impact on the image of the world. Be it TB, malnutrition, polio, India's
campaigns have influenced the world. International Solar Alliance is India's gift against
Global Warming. The initiative of International Yoga Day is India's gift to relieve stress.
Indian medicines have given a fresh lease of life to the people in different parts of the world.
These steps have brought laurels for India and it makes every Indian feel proud. The world
is beginning to believe that India can do very well, so much good for the welfare of mankind
can give.
The question is - how?
The answer to this question is – A Combined resolve of 130 crore citizens for a self-reliant
India i.e. Aatma Nirbhar Bharat. Today we have the resources, we have the power, and we
have the best talent in the world. We will make the best products, will improve our quality
further, make the supply chain more modern, we can do this and we will definitely do it.
And this magnificent building of self-reliant India will stand on five Pillars.

 First Pillar is Economy, an economy that brings Quantum Jump rather than
Incremental change.

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 Second Pillar is Infrastructure, an infrastructure that became the identity of modern
India.

 Third Pillar is Our System. A system that is driven by technology which canfulfil the
dreams of the 21st century; a system not based on the policy of the past century.

 Fourth Pillar is Our Demography. Our Vibrant Demography is our strength in the
world's largest democracy, our source of energy for self-reliant India.

 The fifth pillar is Demand. The cycle of demand and supply chain in our economy, is
the strength that needs to be harnessed to its full potential. In order to increase demand
in the country and to meet this demand, every stake-holder in our supply chain needs
to be empowered. We will strengthen our supply chain, our supply system built up with
the smell of the soil and the sweat of our labourers.

But today’s Aatma nirbhar Bharat is different as compared to the self-sufficiency model of
development followed in the post-independence period in the following ways:

 In the post-independence period, we restricted our private sector and most of the
industries were reserved for Govt. But today we are encouraging entrepreneurs and
businesses and are disinvesting the PSUs and opening all the sectors for private
businesses like coal, railway, defence, space etc.

 In the past we had license raj which required every industry to take govt permission but
today we are focussing more on ease of doing business and giving timely clearance.

 In the past we followed import substitution and isolationism and did not focus on
exports but today we are willing to participate in the global supply chain and
encouraging exports.

 In the post-independence period, we restricted foreign capital (FDI/FPI) and devoid

ourselves of foreign technology, but today India is willing to attract foreign capital in
every sector for ‘Make in India’.

 We are supporting our MSME enterprises by providing them credit guarantee and other
hand holding support rather than reserving products which could be produced only by
MSMEs, which we did in the period before 1991. This will help our MSMEs to
participate in the global supply chain and become competitive rather than making them
inefficient.

Thus today’s “Aatma nirbhar Bharat” reflects upon the idea of ‘self-reliance’ given by Swami
Vivekananda in the second half of the 19th Century, which was about resilience, leveraging
internal strengths, personal responsibility, and a sense of national mission. Atmanirbhar
Bharat is not just a slogan but a vision with deep roots in India’s intellectual tradition and
it means standing up confidently in the world, and not about isolationism behind “narrow
domestic walls”.

In Indian culture, it is said that 'सर्वम् आत्म र्शं सुखम्' i.e. what is in our control, is happiness.
Self-reliance leads to happiness, satisfaction and empowerment. Our responsibility to make
the 21st century, the century of India, will be fulfilled by the pledge of self-reliant India.
This responsibility will only get energy from the life force of 130 crore citizens. This era of
self-reliant India will be a new vow for every Indian as well as a new festival. Now we have to
move forward with a new resolve and determination. When ethics are filled with duty, the
culmination of diligence, the capital of skills, then who can stop India from becoming self-
reliant? We can make India a self-reliant nation. We will make India self-reliant.

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SCHEMES

1. PM Garib Kalyan Yojana

Under the Pradhan Mantri Garib Kalyan Yojana, Rs. 1.7 lakh crore of relief package was
announced on 26th March 2020 for the poor to help them fight the battle against Corona
Virus. Following are the various components of Pradhan Mantri Garib Kalyan package.

(i) PM Garib Kalyan Anna Yojana

5 kg of rice/wheat plus 1 kg pulses per person per month till Nov 2020 to 80 crore
beneficiaries of the National Food Security Act (NFSA) 2013 (i.e. AAY and Priority
Households). This is in addition to what they get under NFSA.

(ii) Insurance Scheme for health workers

 Any health professional, Safai karamcharis, ward-boys, nurses, ASHA workers,
paramedics, technicians, doctors and specialists and other health workers who
while treating Covid-19 patients, meet with some accident, then he/she would
be compensated with an amount of Rs 50 lakh under the Special Insurance
scheme.
 All government health centres, wellness centres and hospitals of Centre as well
as States would be covered under this scheme. Approximately 22 lakh health
workers would be provided insurance cover to fight this pandemic.

(iii) Cash Transfer

A total of 20.40 crores PMJDY women account-holders would be given ex-gratia
of Rs 500 per month for April, May and June.

(iv) Gas Cylinders

Gas cylinders free of cost would be provided to 8 crore poor families (Ujjwala
beneficiaries) for April, May and June.

(v) Low Wage Earners in organized Sector

To the wage-earners below Rs 15,000 per month in businesses having less than 100
workers, Govt. will pay 24 percent of their monthly wages into their PF accounts
for March to August.

(vi) Ex-gratia of Rs 1,000 to 3 crore poor senior citizen, poor widows and poor disabled
would be provided in three months i.e. April May and June

(vii) Self-help groups

Limit of collateral free lending would be increased from Rs 10 lakhs to Rs 20 lakhs
to 63 lakhs Women Self Help Groups (SHGs) which support 6.85 crore households.

(viii) District Mineral Fund

The State Government will be asked to utilise the funds available under District
Mineral Fund (DMF) for supplementing and augmenting facilities of medical testing,
screening and other requirements in connection with preventing the spread of
Covid-19 pandemic as well as treating the patients affected with this pandemic.

2. Garib Kalyan Rojgar Abhiyaan

On 20th June Prime Minister launched Garib Kalyan Rojgar Abhiyan which is a massive
employment -cum- rural public works Campaign named ‘Garib Kalyan Rojgar Abhiyaan’ to
empower and provide livelihood opportunities in areas/ villages witnessing large number of
returnee migrant workers affected by the devastating Covid-19. The Abhiyaan was flagged
off from village Telihar, Block Beldaur, district Khagaria, Bihar.

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This Abhiyaan of 125 days, will work in mission mode, will involve focused implementation
of 25 categories of works/ activities in 116 districts, each with a large concentration of
returnee migrant workers in 6 states of Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan,
Jharkhand and Odisha. Public works to be undertaken during this campaign will have a
resource envelope of Rs. 50,000 crores.

The Abhiyan will be a convergent effort between 12 different ministries of the Central
Government. It will expedite implementation of 25 public infrastructure works and works
relating to augmentation of livelihood opportunities, as a result of which employment will be
rapidly generated. It is an important step towards providing employment to the people on a
mission mode. The Ministry of Rural Development is the nodal Ministry for this campaign
and the campaign will be implemented in close coordination with the State Governments.

The major objectives of the initiative includes:

 Provide livelihood opportunity to returning migrants and similarly affected rural
citizens.
 Saturate villages with public infrastructure and create livelihood opportunities viz.
Roads, Housing, Anganwadis, Panchayat Bhavans, various livelihood assets and
Community Complexes among others.
 The basket of a wide variety of works will ensure that each migrant worker is able to get
an opportunity of employment according to his skill (skillsets of works mapped
including skilled, semi-skilled and unskilled workers), in the coming 125 days. The
Program will also prepare for expansion and development of livelihoods over a longer
term.

3. Emergency Credit Line Guarantee (ECLG) Scheme

 Emergency Credit Line Guarantee (ECLG) scheme is a loan facility for which 100%
guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC)
to Banks/NBFCs/Financial Institutions for lending to MSMEs.

 It will be extended in the form of additional working capital/term loan facility to

MSMEs/Business Enterprises/Pradhan Mantri Mudra Yojana borrowers. (Govt. is also
planning to include those individual entrepreneurs who have borrowed in their individual
capacity/name for the purpose of their business but not in the name of business as these
types of businesses are large in number out of total MSMEs)

 This facility will be available to those who have already borrowed (till 29 th Feb 2020) but
have not been able to repay and their outstanding (yet to be paid) loan is less than Rs.
25 crore and their Turnover (annual sales) is less than 100 crores. The maximum the
businessmen can borrow is up to 20% of the outstanding loan. (For ex, if some business
had borrowed Rs. 50 crore and the amount that is yet to be repaid is Rs. 20 crores then
they can borrow Rs. 4 crores (20% of Rs. 20 crore). The scheme will be applicable from
May 23rd 2020 to 31st Oct 2020.

 The scheme is a specific response to the unprecedented crisis resulting from Covid-19,
which has impacted the small business the most and thereby enabling MSMEs to meet
their operational liabilities and restart their business. The main objective of the scheme
is to provide an incentive to Banks/NBFCs/FIs to increase access to and enable
availability of additional funding facility to MSME/business borrowers.

 The total loan that will be given through this scheme by Banks/NBFCs/FIs would be up
to Rs. 3 lakh crore. Government will pay Rs. 41,600 crore to NCGTC to provide
guarantee on loans worth maximum Rs. 3 lakh crore (as all the loans will not be
default, so Rs. 41,600 crore may be sufficient to provide guarantee for Rs. 3 lakh crore
loan). NCGTC will not charge anything from lending institutions to provide guarantee.

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 It is a pre-approved loan (you will be asked to take loan and if u don’t want you can opt
out) and hence no processing charges and no collateral will be required from the
borrowers. It is a 100% credit guarantee scheme which means the total amount of loan
given under the scheme will be guaranteed by NCGTC.

 The interest rate charged by Banks/NBFCs/FIs will be capped under the scheme.

 National Credit Guarantee Trustee Company (NCGTC) is a company registered under

Company’s Act 2013 under which there are various Trusts which manages guarantee
funds. NCGTC is a Govt company under Department of Financial Services, Ministry of
Finance.

4. Distressed MSME Funds

This is a Subordinate Debt Scheme which will help around 2 lakhs distressed MSMEs.
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust
launched by the Ministry of Micro, Small and Medium Enterprises, Government of India,
and the Small Industries Development Bank of India (SIDBI). CGTMSE gives credit
guarantee to financial institutions that provide loans to MSMEs.

Under this scheme, Government will provide Rs. 4000 crores of funds to CGTMSE. With the
help of this Rs, 4000 crore funds, CGTMSE will be able to provide guarantee of 5 times i.e.
Rs. 20,000 crores (generally in normal times, CGTMSE gives 10 times guarantee but
because of the corona crisis there may be more chances of defaults, so it will be giving
guarantee of only five times of the funds which it will get from government). And since
CGTMSE is giving guarantee, banks will be willing to give loan (subordinate debt) of worth
Rs. 20,000 crores to the promoters/owners of MSME. Now the promoters will put this
borrowed money from the bank into their businesses/MSMEs. As the MSMEs will get equity
capital from the promoters, they (MSMEs) will be able to raise much more debt from the
market to restart their business.

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5. Fund of Funds (Mother fund)
Govt. of India will be creating a fund called ‘fund of funds’ or ‘mother fund’ wherein it will
be putting Rs. 10,000 crores. This Rs. 10,000 crores will now be put into several other
funds created under ‘mother fund’ which will be called ‘daughter funds’. Daughter funds
will be raising money from private investors also and in total ‘daughter funds’ will be worth
Rs. 50,000 crores (as govt. puts money in daughter funds through ‘mother fund’, the
daughter fund will be able to raise money from the market or private investors). The
‘daughter funds’ will invest 15% as equity/share capital in ‘viable and growth potential
MSMEs’. As the MSMEs are getting capital through a govt. fund, these potential MSMEs
will be able to raise money from the market and get listed. In future, their size and
valuation (share price) will increase and government will exit from these MSMEs with a
much higher amount of capital leading to an increase in the capital of daughter funds. Now,
with this higher amount of capital, government will be able to invest in some other growth
potential MSMEs and in this way the funds will keep on revolving and hence it is also called
‘Revolving Fund’.

6. Special Liquidity Scheme for NBFCs/HFCs/MFIs

Special Liquidity Scheme is to provide liquidity support to NBFCs/HFCs/MFIs which
are finding it difficult to raise money in the debt market. This is a Rs. 30,000 crores
scheme by Govt. of India. Under this scheme a Special Purpose Vehicle (SPVs are
entities created to implement specific projects) will issue (special) securities which will
be purchased by RBI and guaranteed by Govt. of India. The proceeds/money from
issuance of such securities will be used by the SPV to purchase short-term debt papers
of NBFCs/HFCs/MFIs.

Even if the scheme is funded by Govt. of India, there is no financial implication for the
Government until the Guarantee involved is invoked. If NBFCs/HFCs/MFIs default on
their debt papers i.e. they will not pay to the SPV (on maturity of the debt paper) then
the SPV will not be able to pay to the RBI and then RBI can invoke the guarantee whose
maximum ceiling limit is Rs. 30,000 crores.

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7. Partial Credit Guarantee (PCG) Scheme 2.0
This scheme is an extension of the Partial Credit Guarantee Scheme 1.0 launched in Aug
2019.

Under the Partial Credit Guarantee Scheme 1.0, Public Sector Banks were allowed to
purchase the loan papers (from secondary market) of NBFCs/HFCs/MFIs to provide
liquidity to NBFCs and manage their asset liability mismatch issue. Central govt. will
provide partial credit guarantee on these assets i.e. if in future these loan papers turn
NPA, then Govt. of India will pay to Public Sector Banks. But there are restrictions on
what kind of loan papers of NBFCs can be purchased by PSU banks and only high rated
loans was allowed up to Rs. 1 lakh crore with the amount of overall guarantee limited to
first loss of up to 10% .

Under PCG 2.0, the scheme will be extended to cover borrowings such as primary
issuance of bonds/ commercial papers of NBFCs/ HFCs/MFIs. NBFCs/ HFCs/MFIs
with low credit rating will be covered so that they are able to raise money from PSBs
and then lend to MSMEs and individuals. The first 20% loss will be borne by the
government and the public sector banks can purchase a maximum of Rs. 45,000 crores
of bonds/ commercial papers of the NBFCs/ HFCs/MFIs. The schemes will be valid till
31st March 2021.

8. Credit Linked Subsidy Scheme (CLSS)

In 2015, the Government of India launched a central sector scheme to help the
financially-deprived population living in urban areas to get a roof over their heads.
Known as the Pradhan Mantri Awas Yojana, it envisages ‘affordable housing for all’, by
giving borrowers the financial means necessary for purchasing a home via a subsidy on
the home loan interest rates. Credit Linked Subsidy Scheme (CLSS) is a component of
PMAY under which, not only economically weaker sections, but also middle-income
groups (annual income Rs. 6 lakhs to Rs. 18 lakhs) can also avail of home loans at
reduced EMIs. Middle income groups were included in this scheme from May 2017. This
scheme was valid till 31st March 2020, but has now been extended till 31st March 2021.

9. Special Micro-Credit Facility Scheme

 The Ministry of Housing and Urban Affairs has launched a Special Micro-Credit
Facility Scheme – PM SVANidhi (PM स्वनिनि ) – PM Street Vendor's Atma Nirbhar
Nidhi
 The street vendors can avail a working capital loan of up to Rs. 10,000, which is
repayable in monthly instalments in the tenure of one year.
 On timely/ early repayment of the loan, an interest subsidy @ 7% per annum will be
credited to the bank accounts of beneficiaries through DBT on six monthly basis.

10. Agriculture Infrastructure Fund

(Launched on 8th July 2020) Agriculture Infrastructure Fund is a Central Sector Scheme
which shall provide medium to long term debt financing facility for investment in viable
projects for post-harvest management Infrastructure and community farming assets
through interest subvention and financial support.

Under the scheme, Rs. One Lakh Crore will be provided by banks and financial
institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing
Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Group (SHG),

8
 Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-
entrepreneurs, Start-ups, Aggregation Infrastructure Providers and Central/State
agency or Local Body sponsored Public Private Partnership Projects.

For all the loans under this financing facility, Government will provide interest
subvention of 3% per annum for loans up to Rs. 2 crore and the subvention will be
available for a maximum period of seven years. Further, credit guarantee coverage will
be available to borrowers from this financing/fund facility under the Credit Guarantee
Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2
crore and the fee for this coverage will be paid by the Government. The total
budgetary support from Govt. of India against subvention and guarantee will be Rs.
10,736 crores.

The scheme by way of facilitating formal credit to farm and farm processing-based
activities is expected to create numerous job opportunities in rural areas. The duration
of the Scheme shall be from FY2020 to FY2029 (10 years).

11. Animal Husbandry Infrastructure Development Fund (AHIDF)

The purpose of the Animal Husbandry Infrastructure Development Fund (AHIDF) is to
incentive investments for establishment of dairy and meat processing and value
addition infrastructure and establishment of animal feed plant in the private sector.
The eligible beneficiaries under the Scheme would be Farmer Producer Organizations
(FPOs), MSMEs, Not for Profit Companies, Private Companies and individual
entrepreneur with minimum 10% (margin) money contribution by them for the project
and the balance 90% would be the loan component to be made available by scheduled
banks.Government of India will provide 3% interest subvention (4% to beneficiaries
from aspirational districts) to eligible beneficiaries. There will be 2 years moratorium
period for principal loan amount and 6 years repayment period thereafter.

12. Formalization of Micro Food Processing Enterprises(FME) Scheme

The unorganized food processing sector in the country comprising nearly 25 lakh food
processing enterprises are unorganized and unregistered. Nearly 66% of these units are
located in rural areas and about 80% of them are family-based enterprises. This sector
faces a number of challenges including the inability of the entrepreneurs to access
credit, high cost of institutional credit, lack of access to modern technology and inability
to integrate with the food supply chain and compliance with the health and safety
standards. To address these challenges, government has launched an all India Centrally
Sponsored Scheme.

The aim of the scheme is:

(i) To modernize and enhance the competitiveness of the existing individual micro
enterprises and ensure their transition to formal sector.
(ii) To support FPOs/ SHGs/ Cooperatives for delivery of package of services,
creation of common infrastructure along the value chain, ensure backward &
forward linkages, branding & marketing, etc.

Salient features of the scheme:

(i) The expenditure will be shared in 60:40 ratio between Central and State
Governments and will be implemented over a period of five years from 2020-21
to 2024-25 with an outlay of Rs 10,000 crores.
(ii) Coverage of 2,00,000 enterprises

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 (iii) Cluster approach and focus on perishables
(iv) Existing Individual micro food processing units desirous of upgradation of their
unit can avail credit-linked capital subsidy @35% of the eligible project cost
with a maximum ceiling of Rs.10 lakhs per unit (govt. will give subsidy on capital
investment and it will be linked with the project loan)
(v) Handholding support for farm level upgradation plan, DPR preparation, Skill
training, obtaining bank credit, FSSAI/ local body license, Udyog Aadhaar etc.
(vi) FPOs/ SHGs/ producer cooperatives would be provided credit linked grant of
35% for capital investment along the value chain.
(vii) Support to SHGs/ FPOs/ Co-operatives in brand building and marketing for the
micro-enterprises
(viii) The Scheme adopts One District One Product (ODODP) approach to reap
benefit of scale in terms of procurement of inputs, availing common services and
marketing of products. The States would identify food product for a district
keeping in view the existing clusters and availability of raw material. The ODOP
product could be a perishable produce-based product or cereal based products
or a food product widely produced in a district and their allied sectors.
(ix) The Scheme also place focus on waste to wealth products, minor forest products
and Aspirational Districts.

13. (TOP to Total) Extension of Operation Greens from TOP (Tomato-

Onion-Potato) crops to all Perishable Fruits & Vegetables
Operation Greens Scheme, being implemented by Ministry of Food Process Industries
has been extended from tomato, onion and potato (TOP) crops to other notified
horticulture crops for providing subsidy on their transportation and storage from
surplus production area to major consumption centres. The objective of intervention is
to protect the growers of fruits and vegetables from making distress sale due to
lockdown and reduce the post -harvest losses. This scheme is only for six months till Nov.
2020.

14. Pradhan Mantri Matsya Sampada Yojana (PMMSY)

The PMMSY will be implemented as an umbrella scheme with two separate Components
namely (a) Central Sector Scheme (CS) and (b) Centrally Sponsored Scheme (CSS). The
scheme will bring about Blue Revolution through sustainable and responsible
development of fisheries sector in India.

The objectives of the scheme are:

 Harnessing of fisheries potential in a sustainable, responsible, inclusive and
equitable manner
 Developing Marine, inland fisheries and aquaculture
 Enhancing of fish production and productivity through expansion, intensification,
diversification and productive utilization of land and water
 Modernizing and strengthening of value chain - post-harvest management and
quality improvement
 Development of infrastructure - fishing harbours, cold chains, markets etc.
 Doubling fishers and fish farmers’ incomes and generation of employment
 Enhancing contribution to Agriculture GVA and exports
 Social, physical and economic security for fishers and fish farmers
 Robust fisheries management and regulatory framework
 Government will register “Sagar Mitra” to provide fisheries extension services and
will encourage formation of Fish Farmers Producer Organizations (FFPOs) to help
achieve the PMMSY goals

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REFORMS

1. Change of Definition of MSMEs

2. The Farmers’ Produce Trade and Commerce (Promotion and

Facilitation) Ordinance 2020

 It has overriding powers in case of any inconsistency arising because of the APMC
acts of States.
(It will remove any confusion with APMC acts)

 Any farmer and trader is free to do trade (buy/sell) his produce (including milk,
livestock etc.) in any State all over India (but outside the APMC or State govt.
regulated mandis). This will include trade at any place like the farm gate, factory
premises, warehouses, cold-storages etc. or any online market platform.
(Freedom to trade at any place in India without any restriction will create One India
One Agriculture Market)

 The trader who transacts with the farmer will have to make payment on the same
day or within maximum 3 working days if required (subject to the condition that the
receipt of delivery mentioning the due payment amount shall be given to the farmer
on the same day)
(Timely payment and hence farmers can’t be exploited)

 No market fee or cess or levy, or any other charge by whatever name called, shall be
levied on any farmer or trader or electronic trading/transaction platform for trade
and commerce (outside the state APMC mandi trade)
(This will create the real competition with State APMC Mandis as in State APMC
mandis there are various charges which increases the price of the produce, so this will
motivate traders/farmers to come to new private mandis).

 Separate dispute resolution mechanism (the farmer or the trader may seek
conciliation by filing an application to the Sub-Divisional Magistrate who shall refer
such dispute to a Conciliation Board to be appointed by him)
(Timely settlement of disputes)

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3. The Farmers (Empowerment and Protection) Agreement on Price
Assurance and Farm Services Ordinance, 2020.
(it is basically Contract Farming)

 The farmers (including FPOs) can enter into farming agreements with buyers (also
called Sponsor) for sale of farm produce (including dairy and livestock etc.) and
provision of farm services (like supply of seeds, inputs, machinery, technology by
buyers)
(This was earlier prohibited by some states, so it has given freedom to farmers)

 Farming Agreements entered under this Ordinance between farmer (including FPOs)
and buyer (also called Sponsor) shall be exempt from the application any State Act.
(It will remove any kind of confusion and interference by States)

 Minimum period of the agreement will be one crop season and maximum five years.
(Farmers cannot be forced to sign the agreement for more years and will prevent
exploitation of farmers)

 The acceptable quality and grade may be provided in the agreement to be signed
between the farmer and the buyer.
(Will help in minimizing future disputes)

 The price to be paid to the farmer for the produce should be mentioned in the
farming agreement, and in such case where price is subject to variation then it
should have two parts. One is a guaranteed minimum price component and an
additional amount linked to APMC prices, or any electronic trading platform or any
benchmark prices.
(Farmers will be protected of their income and can’t be exploited)

 The buyer should make payment of agreed amount at the time of accepting the
delivery of farming produce.
(Farmers will be ensured of timely payment)

 Any stocking limit issued under Essential Commodities Act 1955 or any other Act
shall not be applicable to the farming produce purchased under the farming
agreement entered in accordance with this Ordinance.
(Will motivate buyers to sign agreement with the farmer without any hiccups)

 This farming agreement can be linked with insurance or credit instrument to ensure
risk mitigation or flow of credit to farmer or buyer
(Can be used to provide credit/insurance)

 Every State may notify a ‘Registration Authority’ to provide for electronic registry of
registration of farming agreements.
(A dedicated State agency will help both farmers and buyers and no one can be
denied in future of the terms and conditions signed in the agreement)

 Every farming agreement shall provide for a conciliation process and formation of a
conciliation board to resolve the disputes.
(Timely settlement of disputes outside the courts will help both parties)

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4. Amendment in Essential Commodities Act 1955

 The supply of food stuffs including cereals, pulses, potato, onions, edible oilseeds
and oils can be regulated only under extraordinary circumstances which may
include war, famine, extraordinary price rise and natural calamity of grave nature,
as notified by the Central Govt.
(Remove unnecessary regulation in trade of these commodities and will help attract
investments in the supply chain infrastructure of agri-commodities)

 Stocking limit restrictions can be imposed only in case of extraordinary price rise
(100% increase in case of perishables and 50% increase in case of non-perishable
food stuffs over a 12-month period). But the good thing is that, even in these cases
Exporters and Food Processors will be exempted from these regulations of
stocking/marketing.
(Will promote more exports and food processing and will protect consumers also from
too much price rise)

5. Commercial Coal Mining

Till 2018, only captive mining was allowed in India (which means any company can bid
for the coal block/mine but can use it only for its specific purpose for example using it
in their own power plants; steel plants etc. and companies were not allowed to sell coal)
In 2018, govt. notified the ‘commercial coal mining’ clause which it had already
introduced through Coal Mines Act 2015. (Commercial coal mining means those
companies which will get the block during auction will be free to extract coal and sale coal
in the domestic market as well as export it). Under Aatma Nirbhar Bharat, govt executed
this reform on ground by auctioning 41 coal blocks in June 2020 for commercial coal
mining under Revenue Sharing Model which means the bidder quoting the maximum
revenue share with the government got the coal block.

Also, government will be giving composite licenses for extraction and production of
minerals rather than separate licenses for separate activity which was prevalent earlier.

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ADDITIONAL MEASURES
1. Global tenders (foreign companies) will be disallowed in government procurement
tenders up to Rs. 200 crores. This will be done as Indian MSMEs and other companies
have often faced unfair competition from foreign companies. It will help MSMEs to
increase their business and support Make-in-India.

2. Statutory PF contribution of both employer and employee will be reduced to 10% each
from existing 12% each for all establishments covered by EPFO for June, July and
August. (This will be applicable to workers who are not eligible for 24% EPF support under
PM Garib Kalyan Package)

3. DISCOMs will be given loan against State guarantees for discharging their liabilities
against GENCOs.

4. Ministry of Housing and Urban Affairs advised States/UTs to treat Covid-19 as an event
of ‘Force Majeure’ under Real Estate Regulation Act (RERA) and extend the registration
and completion date suo-moto by 6 months for all registered projects expiring on or
after 25th March 2020 without individual applications.

5. Government of India permitted State Governments to utilise State Disaster Response

Fund (SDRF) for setting up shelter for migrants and providing them food and water etc.

6. Migrants, who were not covered under NFSA or State Card beneficiaries in the state
they are stationed, were provided 5 kg of grains per person and 1 kg Chana per family
per month for two months and the cost was borne by Central Govt.

7. Government of India gave interest subvention (subsidy) of 2% to prompt payees of

MUDRA Shishu loans for a period 12 months.

8. Rs. 30,000 crore of additional refinance facility will be provided by NABARD to RRBs
and Rural Cooperative Banks for mostly small and marginal farmers.

9. There will be more focus on self-reliance in defence production by promoting Make-in-

India

10. Improve autonomy, accountability and efficiency in Ordnance Supplies by

Corporatisation of Ordnance Factory Board.

11. Right now, 100% FDI is allowed in defence manufacturing through Govt. approval route
and 49% is allowed through automatic route. Govt has decided to increase FDI under
automatic route to 74%.

12. Government will launch more world class airports through Public Private Partnership
(PPP) model.

13. There is huge potential in the business of Maintenance, Repair and Overhaul (MRO) of
planes. Right now, most of the planes from India go abroad for MRO services. So, govt
has planned to reduce the GST on MRO services from 18% to 5%. This will attract
companies to set up MRO business services in India and the MRO service cost
(maintenance) for Indian planes will get reduced as now they can get all this
domestically done.

14. Government will introduce reforms in the electricity tariff policy:

o DISCOMs will be penalized for load shedding

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 o Reduction in cross subsidies
o Smart prepaid meters
o Subsidy through DBT
o Privatization of distribution in Union Territories

15. Government will allow private companies in satellites, launches and space-based
services. Future projects for planetary exploration, outer space travels etc. to be open
for private sector.

16. Research reactors in PPP mode will be established for production of medical isotopes to
promote welfare of humanity through affordable treatment of cancer and other diseases.
Facilities will be established in PPP mode to use irradiation technology for food
preservation.

17. Government allocated Rs. 40,000 crores more for MGNREGA in light of the corona crisis
(the budget allocation was Rs. 61,500 crore)

18. The minimum threshold to initiate insolvency under IBC has been raised to Rs. 1 crore
from earlier threshold of Rs. 1 lakh. This means that if a company has taken Rs. 50
lakh loan and defaulted then it cannot be dragged to NCLT under IBC 2016. As most of
the MSMEs are quite small and their loan amount is also less, so any default by them
will not trigger insolvency under IBC.

19. Insolvency and Bankruptcy Code (IBC) 2016 has been suspended for a period of six
months from 25 March to protect businesses from being dragged to bankruptcy courts
because of Covid-19. But there is NO BLANKET suspension of IBC, which means if the
default is of prior date of 25th March, then the creditors can move to NCLT (under IBC).

20. Govt. will release a new Public Sector Enterprise Policy under which PSUs will be
allowed to be present only in the Notified Strategic Sectors with Minimum 1 PSU and
Max 4 PSUs. PSUs in other than the Strategic Sectors will be privatized and private
companies will be allowed in all the sectors whether it is Strategic or not.

21. Centre has accepted the request of States and has increased the borrowing limits of
States from 3% (of State GDP) to 5% for 2020-21 only. This will give extra resources of
around Rs. 4.28 lakh crore to States. In this 2% increase, there will be:

 Unconditional increase of 0.5%

 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified,

measurable and feasible reform actions

 Further 0.5% if milestones are achieved in at least three out of four reform areas

 The four reform areas are ‘One Nation One Ration Card’, ‘Ease of Doing
Business’, Power distribution’ and ‘Urban local body revenues’

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RBI MEASURES TO EASE LIQUIDITY
(27th March and 17th April 2020)

1. Repo (Policy) Rate = 4%

Reverse Repo Rate = Repo Rate – 0.65% = 3.35%
Bank Rate = MSF Rate = Repo Rate + 0.25% = 4.25%

2. Earlier the difference in repo rate and reverse repo rate was just 0.25% but because of
the corona crisis it has been increased to 0.65%. This has been done so that banks,
rather than keeping their money with RBI, they should try to lend more which will
resolve the liquidity problem in the economy.

3. Cash Reserve Ratio (CRR) was reduced from 4% to 3% which has the potential to release
around Rs. 1.37 lakh crore of liquidity in the market.

4. RBI allowed the banks to defer payment of EMIs for 6 months (which is called
moratorium) on various categories of loans without being downgraded these loan papers
to NPA (as not paying EMI leads to loan paper being classified as NPA).

5. MSF borrowing increased up to 3% of SLR from the earlier limit of 2% of SLR.

6. RBI conducted (variable rate) Long Term Repo Operation (LTRO) worth Rs. 1 lakh crore.
This means that RBI will give loan to banks for up to three years at floating rate = Repo
+ some spread. (Repo operation is for overnight purpose and LTRO is for long term lending
by RBI). And the liquidity which will be available to banks through this LTRO, the banks
will have to deploy in bonds, non-convertible debentures and commercial papers of
other companies. So, basically banks will purchase these instruments (bonds,
debentures, commercial papers) of a company and will pay the money to the company
which will increase liquidity of the company.

7. RBI observed that the deployment of Targeted LTRO (TLTRO, as it is targeting specific
sectors) funds was largely been used to purchase bonds issued by public sector entities
and large corporate, especially in primary issuances (first time when company is raising
debt in primary market). But the disruptions caused by COVID-19, severely impacted
small and mid-sized corporate, including non-banking financial companies (NBFCs) and
micro finance institutions (MFIs), in terms of access to liquidity.

So, RBI decided to do TLTRO again (called TLTRO 2.0) worth Rs. 50,000 crores and the
funds availed by banks under this should be invested in bonds, commercial paper, and
non-convertible debentures of NBFCs, with 50% of the amount should be going to small
and mid-sized NBFCs and Micro Financial Institutions (MFIs) (RBI has put restriction
that TLTRO 2.0 should be only for NBFCs/MFIs because they are the major source of
funding to MSMEs). And it should be under Held to Maturity (HTM). This means that the
bonds which banks will get after investing in NBFCs, these bonds banks will have to
hold till maturity. So, it is a kind of restriction on banks that you need to remain
invested till end and you cannot exit.

8. RBI will provide special refinance facilities for a total amount of Rs. 50,000 crore to
NABARD, SIDBI and NHB to enable them to meet sectoral credit needs. This will
comprise Rs. 25,000 crore to NABARD for refinancing regional rural banks (RRBs),
cooperative banks and micro finance institutions (MFIs); Rs.15,000 crore to SIDBI for
on-lending/refinancing; and ₹ 10,000 crore to NHB for supporting housing finance
companies (HFCs). Advances under this facility will be charged at the RBI’s policy repo
rate at the time of availing.

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9. Ways and Means Advance (WMA) limit of States is increased by 60% and the increased
limit will be available till 30th Sept 2020. Number of days States can be in continuous
overdraft increased from 14 days to 21 days.

WMA is a facility for both the Centre and states to borrow from the RBI. These
borrowings are meant purely to help them to tide over temporary mismatches in cash
flows of their receipts and expenditures subject to their being repayable “not later than
three months from the date of the making of the advance”. The interest rate on WMA is
the RBI’s repo rate.

The governments are, however, allowed to draw amounts in excess of their WMA limits
which is called overdraft and the interest on such overdraft is 2 percentage points above
the repo rate.

10. Scheduled commercial banks and cooperative banks shall not make any further
dividend payment from profits pertaining to the financial year ended March 31, 2020.

11. In order to ease the liquidity position at the level of individual institutions, the Liquidity
Coverage Ratio (LCR) requirement for Scheduled Commercial Banks was brought down
from 100 per cent to 80 per cent. The requirement shall be restored later.

The LCR is calculated by dividing an institution’s (Banks/NBFCs) high-quality liquid

assets (for example cash, govt. securities, securities issued or guaranteed by foreign
governments etc.) by its total net cash flows, over a 30-day period. Suppose a bank's
expected cash outflow/spending for the next 30 days is Rs. 150 and cash inflow is
expected to be Rs. 50, that means net cash outflow for next 30-day period is Rs. 100. In
such a case if bank is holding cash and govt. securities (which are called High Quality
Liquid Assets) of Rs. 60, then LCR = (High Quality Liquid Asset)/ (Banks Net cash
outflow for 30-day period) = Rs. 60/ Rs. 100 = 60%.

Earlier only banks used to maintain LCR. But in background of IL&FS and HDFL crisis,
RBI on 24th May 2019 proposed introducing LCR for large NBFCs to help tackle
liquidity issues in the sector. NBFCs will have to maintain minimum high-quality liquid
assets of 50% of total net cash outflows over the following 30 calendar days starting
from Dec 1, 2020 and from Dec 1, 2024 100%.

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CONCLUSION/IMPACT

1. Financial and growth impact of Covid-19:

Direct taxes have declined about 30% in the first quarter (April – June) of 2020-21 and
GST (indirect tax) revenues have declined about 40%. The real GDP growth is expected
to decline by 25% in the April-June quarter and around 5% in the overall FY 2020-21 as
most of the sectors except agriculture will see heavy disruption because of the
lockdown.

2. Financial implication of the AatmaNirbhar Bharat package:

Govt. announced Aatma Nirbhar Bharat package worth Rs. 21 lakh crores which is
around 10% of GDP (Rs. 204 lakh crore). This includes the RBI measures (of liquidity) of
around Rs. 8 lakh crores plus the Central government stimulus of Rs 13 lakh crore.

But try to understand that this Rs. 13 lakh crore package, government will not actually
be spending out of its budgetary resources (or Consolidated Fund of India). For
example, this package of Rs. 13 lakh crore includes Rs. 3 lakh crores for ‘Emergency
Credit Line Guarantee Scheme’ for MSMEs. In this scheme, banks will be giving loan
to MSMEs worth Rs. 3 lakh crores and Govt will just provide guarantee on these loans
and in case of default, govt will pay. Govt has provided only Rs. 41,600 crores to provide
this guarantee on Rs. 3 lakh crores of loans (because practically all the loans will not be
defaulted). So, the actual outgo from the CFI will be only Rs. 41,600 crore but in the
‘Aatma Nirbhar Bharat’ package it is reflected as Rs. 3 lakh crore. In similar way there
are other schemes also. But there are few measures where the actual government
expenditure is being reflected in the ‘Aatma Nirbhar Bharat’ package for example
distribution of free food grains worth Rs. 1.5 lakh crore.

The States fiscal deficit is going to increase from the projected 3% level to 5% in the
fiscal year 2020-21 and the Central fiscal deficit is going to increase from the projected
3.5% (Rs. 8 lakh crores) level to more than 6% (Rs. 12 lakh crores). So, the combined
fiscal deficit of Centre and States for FY 2020-21 is expected to increase to 11% to 12%
of GDP and this is because of two reasons. The first is because of higher borrowing (due
to lesser tax revenues) to spend for the economic stimulus package and the second is
lower GDP growth (because of lower value of GDP, the same borrowed amount looks
high when expressed in percentage terms).

3. Focus on Supply side rather than demand side:

Covid-19 induced lockdown has resulted in collapse of demand (due to job losses) and
supply both as it has interrupted all kinds of production chains. This crisis has brought
to the fore short-term challenges on the demand side and long-term supply side issues.
But, Modi government has ceased this opportunity to try and push through long-term
structural reforms which the country badly needs but has not done much on the
demand side.

In the short term, the world is facing a deep recession and India cannot escape
unscathed despite whatever it does. So, whatever it does, there is going to be trouble
and the present year is going to be the worst in Indian economic history.

This particular package of Rs 21 lakh crore is a highly exaggerated figure by adding

pledges, promises and long-term things. The actual fiscal stimulus is perhaps not more
than 1.5% of GDP and this is because the government may be worried of rating
downgrade by foreign rating agencies as it impacts foreign investments (and as India is
a capital starved economy, it does matter. But the other logic is even if there is a rating
downgrade; investors will still come to India as all the countries are facing this crisis, so
where will the investors go?). But, the government has turned to be quite conservative

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on the spending front and that’s why we may face a deep and painful recession and this
package is not sufficient to stimulate the short-term demand in the economy.

As, Indian economy is 60% consumer driven (out of the total GDP, 60% is demanded by
the household sector which is consumption goods), government could have spent more
directly (may be transferring money into the accounts of the people) to sustain and
improve the economy. And since govt. has not done so, the recession is going to be
much deeper than otherwise (for example, govt has given interest subsidy on loans to
small businesses but it is not giving subsidy on loans taken by the general people for
consumption purpose). It is a risky political move, but as the Central elections are due
after four years, so govt. may have deliberately taken this risk that let us take a big hit
this year and then bounce back later with more supply side reforms (and someone may
say that it is a political calculation rather than an economic one).

India has always been criticized by the outside world (mostly investors) of its structural
issues in various sectors like labour laws, electricity (distribution), railway
transportation, inefficient PSUs, regulated agricultural markets etc. So, this crisis is the
best time to initiate deep structural reforms on the supply side. This I am saying so
because in 2016, Dr. Manmohan Singh said about India that ‘We act only in crisis. He
was basically referring to the 1991 BoP crisis and the subsequent reforms introduced at
that time. We have deep resistance to change or reform ourselves and we don’t allow the
government to introduce reforms in normal times. May be, Mr. Modi understood this
and using this crisis as an opportunity to push for supply side reforms under ‘Aatma
Nirbhar Bharat’ which was pending for long. This year of 2020 may become a turning
point in India’s economic history.

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