Thursday, March 26, 2020

INR 1.75 trillion economic package in India to address the impact of COVID-19

Indian finance minister Niramla Sitharaman announced an economic package of INR 1.75 trillion (about US$23 billion at 1 USD = INR 75.4 exchange rate) today to address the impact of COVID-19 on the economy. It is mostly augmentation of existing social protection measures. It is tagged as ‘Pradhan Mantri Garib Kalyan Package’. The package amounts to 0.9% of GDP (FY2020RE) and includes:
  • Insurance scheme for healthcare workers fighting COVID-19 in government hospitals and healthcare centers
  • EPF payment of employees who earn less than INR 15,000 per month and work in companies with less than 100 employees
  • Cash transfers:
    • Each farmer gets INR 2000 in April 2020 as an advance installment from PM-KISAN scheme (total INR 16,000 crores or US$2.13 billion). [Each farmer owning a land gets INR 6,000 per year under the scheme] 
    • INR 31,000 crore (US$ 4.12 billion) under PMJDY women account-holders (INR 500 per month for the next three months)
    • INR 13,000 crore (US$ 1.73 billion) worth of cooking gas cylinders to 80 million households for the next three months (one each month)
    • INR 5,000 crore (US$ 0.66 billion) to prevent job losses in organized sector (govt to pay 24% of monthly wages into their PF accounts for the next three months)
    • INR 3,000 crore (US$ 0.4 billion) for senior citizens (INR 1000 per month for the next three months to about 30 million aged widows and people in Dviyang category)
  • Food subsidy:
    • INR 40,000 crore (US$ 5.31 billion) to double entitlements of food grains (5 kg rice extra) for the next three months to 800 million people
    • INR 5,000 crore (US$ 0.66 billion) to provide one-kilogram pulses per family for the next three months
  • Employment protection: INR 5,600 crore (US$ 0.74 billion) to cover increase in MNREGA wages (by INR 20 with effect from 01 April 2020) to benefit 136 million households. Wages per day will now become INR 202.
  • Other measures
    • Allow non-recoverable advance of 75% of amount or three months of wages from EPF accounts. 40 million registered families to benefit from this
    • Collateral free loans of INR 2 million (up from INR 1 million) to women organized 6.3 million self-help groups 
These measures are on top of the previously announced measures to help the business sector (mostly compliance relief) and state-specific measures.