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Indian Economy

Economic Stimulus-V

  • 18 May 2020
  • 9 min read

Why in News

Recently, the Union Finance Minister announced the measures for providing employment and support to businesses, state governments as well sectors such as education and health as part of the fifth and final tranche of Atmanirbhar Bharat Abhiyan.

Key Points

  • Increase in Allocation for MGNREGA
    • The Government will allocate an additional Rs.40,000 crore under Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA).
    • It will help generate nearly 300 crore person days in total, addressing the need for more work by the migrants who are returning to their hometowns due to the pandemic and lockdown.
    • Creation of a larger number of durable and livelihood assets including water conservation assets which will boost the rural economy through higher production.
  • Health Reforms and Initiatives
    • Public expenditure on health will be increased by investing in grass root health institutions and ramping up health and wellness centres in rural and urban areas.
    • Preparing India for future pandemics:
  • Technology Driven Education with Equity
    • Government will launch PM eVIDYA, a programme for multi-mode access to digital/online education with immediate effect. It consists of:
      • DIKSHA for school education in States/UTs: e-content and QR coded Energized Textbooks for all grades (one nation, one digital platform)
      • One earmarked TV channel per class from 1 to 12 (One class, One channel)
      • Extensive use of Radio, Community radio and Podcasts.
      • Special e-content for visually and hearing impaired.
      • Top 100 universities will be permitted to automatically start online courses by 30th May, 2020.
    • Manodarpan, an initiative for psycho-social support for students, teachers and families for mental health and emotional well-being will be launched.
    • New National Curriculum and Pedagogical framework for school, early childhood and teachers will be launched.
    • National Foundational Literacy and Numeracy Mission for ensuring that every child attains learning levels and outcomes in grade 5 by 2025 will be launched by December 2020.
  • Measures Related to IBC
    • Minimum threshold to initiate insolvency proceedings has been raised to Rs.1 crore (from Rs.1 lakh, which largely insulates Micro, Small and Medium Enterprises-MSMEs).
    • Special insolvency resolution framework for MSMEs under Section 240A of the Insolvency and Bankruptcy Code (IBC) will be notified.
    • Suspension of fresh initiation of insolvency proceedings up to one year, depending upon the pandemic.
    • Empowering the Central Government to exclude Covid-19 related debt from the definition of “default” under the IBC for the purpose of triggering insolvency proceedings.
  • Measures Related to the Companies Act
    • Decriminalisation of Companies Act, 2013 violations involving minor technical and procedural defaults (shortcomings in Corporate Social Responsibility (CSR) reporting, inadequacies in Board report, filing defaults, etc).
    • Majority of the compoundable offences sections to be shifted to Internal Adjudication Mechanism (IAM).
    • The amendments will de-clog the criminal courts and National Company Law Tribunal (NCLT).
  • Ease of Doing Business for Corporates
    • Key reforms include:
      • Direct listing of securities by Indian public companies in permissible foreign jurisdictions.
      • Private companies which list Non-Convertible Debentures (NCDs) on stock exchanges not to be regarded as listed companies.
      • Including the provisions of Part IXA (Producer Companies) of Companies Act, 1956 in Companies Act, 2013.
      • Power to create additional/specialized benches for National Company Law Appellate Tribunal (NCLAT).
      • Lower penalties for all defaults for Small Companies, One-person Companies, Producer Companies and StartUps.
  • Public Sector Enterprise Policy for a New, Self-reliant India
    • Government will announce a new policy whereby:
      • List of strategic sectors requiring the presence of Public Sector Enterprises (PSEs) in public interest will be notified.
      • In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed.
      • In other sectors, PSEs will be privatized (timing to be based on feasibility etc.).
  • Support to State Governments
    • The Centre has decided to increase borrowing limits of States from 3% to 5% for 2020-21 only which will give States extra resources of Rs.4.28 lakh crore.
    • Part of the borrowing will be linked to specific reforms (including recommendations of the Finance Commission).
    • Reform linkage will be in four areas:
    • States can borrow more in the following pattern, notified by the Department of Expenditure:
      • The first 0.5% will be an unconditional increase.
      • Next 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable and feasible reform actions.
      • The last 0.50% if milestones are achieved in at least three out of four reform areas.


  • On Increase in Allocation for MGNREGA
    • The step to allocate more resources to MGNREGA was widely welcomed as it will support rural livelihoods in the time of crisis.
    • However, given that States account for 40% of MGNREGA expenditure, including most upfront costs, they will also have to spend on the scheme.
    • Demand for work under MGNREGA had surged to a nine-year high in 2019-20 as 5.47 crore households availed of the scheme, the highest since 2010-11.
  • On Support to State Governments
    • The expansion of the fiscal deficit has been welcomed by the states because GSDPs (Gross State Domestic Product) are likely to contract and further shrink the possible borrowing at a time when States are at the frontline of containment and relief operations.
    • However, the conditions on additional loans have been criticised on the grounds that in future, severe conditions may be imposed on even normal loans.
    • The utilisation of additional 2% borrowing by states can be lower because states may settle on borrowing less to avoid undertaking politically difficult reforms.
    • A likely increase in borrowing cost due to the emerging gap between total Public Sector Borrowing Requirement (PSBR) and available resources will also lead to states not opting for the increased borrowing.
  • On Public Sector Enterprise Policy
    • It was criticised on the grounds that privatising PSUs would find fewer buyers at a time of global recession, while any potential buyer would be spending money which could have gone into fresh investment on a financial transfer instead, effectively contracting demand.

Source: PIB/IE/TH

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