Rs 1.7 lakh crore package at the poor, implementation will be the key

In a major step to provide relief to the poor of the country, the Narendra Modi government announced a Rs 1.7 lakh crore Pradhan Mantri Garib Kalyan Yojana within 36 hours of a three-week national lockdown to combat the spread of the deadly coronavirus. Addressing a press conference on Thursday, Finance Minister Nirmala Sitharaman said that the scheme, to be implemented through direct cash benefit and food security, will directly benefit 80 crore poor people in the country.

“We do not want anyone to remain hungry… also they should not remain without money in hand,” Sitharaman said, adding that the scheme will immediately help migrant workers, urban and rural poor. “We are looking both at cash transfers as well as food security measures.”

As part of the food security provision, the poor will be eligible to get an additional 5 kg of rice or wheat for three months without any cost. They will also get an additional one kg of pulses of their choice. Besides, Sitharaman announced increasing the MNREGA wages from Rs 182 to Rs 202 a day. This move is expected to benefit about five crore families.

The Minister also announced a Rs 50-lakh medical insurance cover to all the frontline workers including ASHA and sanitation workers, paramedics, nurses and doctors who have come forth to help those who have been infected by the virus.

“We are giving Rs 50-lakh insurance cover per person for the warriors who are exposing themselves to the virus… This includes workers, doctors, nurses, etc,” Sitharaman said.

The government has also decided to amend the Employees’ Provident Fund Organisation rules to provide flexibility in withdrawal of money. The Finance Minister said that the government will pay both contributions to be made by employers and employees to the EPF account for the next three months to ensure continuity.

The EPFO will also allow withdrawal of 75 per cent of the credit standing in the EPF account or three months of wages, whichever amount is lower. The withdrawal, however, will be non-refundable.

“This will be paid by the government for the next three months so that nobody suffers due to lack of continuity of the EPF,” Sitharaman said. This will be applicable to all establishments which have up to 100 employees and 90 per cent of those with monthly salaries of less than Rs 15,000 per month.

This is a huge move, provided that implementation of the same is carried out seamlessly.

“Rs 1.7 lakh crore is about 0.8 per cent of GDP. Collapse of demand, as was being feared by many, looks unlikely… So the period of lockdown may not be extended. These measures, if effectively and quickly implemented, would make the total shutdown more complete. This is the biggest positive for listed companies,” Sujan Hajra, chief economist and executive director, Anand Rathi Shares & Stock Brokers, said.

Sitharaman hinted at more measures on the cards. Besides, the Reserve Bank of India is also set to reduce interest rates by a substantial quantum..