Our Prime minister, on 12th May 2020, at 8:20 PM- that is at 20:20 announced a 20 lakh crore economic package in his speech of 20 minutes Thank heavens this announcement was not made during a 20-20 cricket match The Prime minister merely announced it, after which our Finance minister divulged the details of the package part by part over the next five days Come, let us find out what this package of 20 lakh crores holds for you for a common man and for the middle-class people What are its benefits and disadvantages? And is the 20 lakh crore package really worth 20 lakh crores?
And I will also explain some complex economic terms like fiscal stimulus and liquidity injection in today’s When you hear 20 lakh crore rupees, then you might assume that this means that that the government will spend 20 lakh crore rupees from its coffers to aid the public But it is not so In order to comprehend this, you will first have to understand that there are two kinds of policies in economics- monetary policies and fiscal policies The monetary policies are framed by a country’s central bank RBI is the central bank in India Monetary policies basically involves fluctuating the interest rates change the supply of money in order to control inflation This is done by the RBI The other policy is the fiscal policy which is made by the government
The government adjusts its budget- which places to invest more, increases the tax rates Those are the fiscal policies The monetary policies are determined by the RBI and the RBI is independent of the technical government- in principle And the government formulates fiscal policies 8 lakh crore rupees out of the 20 lakh crores is an injection of liquidity by the RBI
It’s wrong to list the RBI ‘s monetary package. It’s unfair to do so because once we spoke about the countries ‘ economic packages worldwide, we considered just fiscal packages. When we said the US launched an economic package of 2 trillion dollars, it meant just a fiscal package involving what acts and decisions the government took there Germany launched a package.
RBI (8 Lack Crore)
RBI was not in use in the economy It is simply laying there When RBI will make its reserves liquid, then it will seep into the economy and the people will be able to sell or buy it once it will be converted into cash The RBI will do this by lowering its interest rates so that the rest of the banks that take loans from the RBI are able to avail loans for lesser interest And when they take loans at lower interest rates, they would be able to loan out to the companies and people at a lower interest as well And in this way, the extra money of 8 lakh crore rupees with the RBI the reserves of the RBI would be injected into the Indian economy basically
The money would first go to the banks and then reach the companies and the people The money would come into the economy in the form of loans So the loans that RBI gives to the other banks and the interest rates that it charges them is called repo rate You must have heard in the news that the RBI is cutting down the repo rate Because this is the only way- through the process that I explained- RBI would slash its interest/repo rate the other banks would be able to avail cheaper loans and this is how the money would be infused in the economy.
OLD Schemes (1.9 Lack Crore)
So, out of the 20 lakh crores, 12 lakh crores remain which is the government’s fiscal package Out of this 12 lakh crore, the government had already declared 1.7 lakh crore in the previous package, which is recounted in this And there are some other items in this remaining corpus that the government announced earlier, but they are recounting it in this 20 lakh crore package
New Package (10+ Lack Crore)
Let us get a section by section overview to find out what this economic package entails First, for the MSMEs- Micro, small and medium enterprises- The government has decided to dole out collateral-free automatic loans worth 3 lakh crore rupees The companies would definitely benefit- but keep in mind- this is a loan Money is being loaned out and not given out There would be a liquidity infusion worth 90,000 crore rupees for the power distribution companies It is a loan/loan guarantee in a way and it is being expected that the power companies would pass on the benefits to the consumers Our farmers would be given a concessional credit of 2 lakh crore rupees
This again gives loans at lower interest rates A special credit facility worth 5,000 crore rupees have been given to street vendors This also means giving them loans A supply of free food grains will be made available to migrant workers for the next two months, costing about 3,500 crore rupees, and the government believes that this would help 8 crores, migrant workers Basically, loans are being provided to individuals and businesses at lower interest rates even without collateral There’s nothing wrong about this – it will certainly help some businesses and some individuals. But at the end of the day, loans are being provided out.
The situation today has evolved due to the government. It was appropriate but not all the burden should be piled up on the people Moreover, such items were counted in this economic package of 20 lakh crores which is basically your money, For example, 25 percent reduction of TDS What benefit does it give? Currently, none. Just that you’d get more liquidity in TDS at the moment, but, ultimately, you don’t get a lot of money Equally, the EPF allocation has been reduced to 10 percent from 12 percent, too. That’s your money you ‘d be able to use later.