Stimulus Package, At Last

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Prime minister Narendra Modi has announced a stimulus package of Rs 20 lakh crore to ease the devastating fallout on the economy of the prevailing Covid-19 crisis. In an address to the nation on Tuesday, the PM said that the package was geared to make India self-reliant. The PM’s address came a day after he held a marathon six-hour meeting with chief ministers during which several states sought an extension of the lockdown. Others pitched for further easing of restrictions and more say in determining which districts should fall under red, orange and green zones.

In his address, the PM Modi said the fourth phase of the lockdown will be in a new form, making a case for taking the Covid-19 into stride. He said, and rightly so, that we can’t let our lives remain confined around the disease. And the best way to fight the disease, the PM said, was to wear masks and maintain social distancing.

On Wednesday, the finance minister Nirmala Sitharaman spelled out granular details of the PM’s package. She announced a facility of Rs 3 lakh crores collateral-free automatic loans for business, including micro, small and medium enterprise (MSMEs). This has made borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover eligible. Loans will have 4-year tenure with a moratorium of 12 months on principal repayment, Besides, there will be 100 per cent credit guarantee cover to banks and NBFCs on principal and interest. This will enable 45 lakh MSME units to resume business activity and safeguard jobs. A large part of the package, around Rs 8.04 lakh crore, will be the additional liquidity injected into the system by the Reserve Bank of India through various measures.

This is the biggest stimulus package announced by the union government so far and it should go a long way to cushion the impact of Covid-19. At the same time, the government will have to find a way out of the lockdown. The new rules for the lockdown 4.0 will be announced before May 18 and it will include the suggestions by the Chief Ministers. Truth is the government is in no position to go on extending the lockdown. It has to work towards a graded exit from it in the interest of the economy. Millions have already lost jobs and a prolonged shutdown of the economy will only pile on the misery. While stimulus package will offer a relief, for economy to get back on feet, the government has be open it.

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