Finance Minister Nirmala Sitharaman on March 26 announced a Rs 1.70 lakh crore Prime Minister Gareeb Kalyan Scheme, effective immediately.
Reacting to the announcement Harish Damodaran, Editor- Rural & Agriculture at Indian Express, told CNBC-TV18 that lack of liquidity needs to be avoided. "Those people don't need additional grains as they already get 5 kg, which is decent. I'd have preferred cash - maybe Rs 5,000 - for them. They cannot work from home,” he noted.
Siraj Hussain, Former Agriculture Secretary raised questions on how the 1 kg pulses will be distributed. “Movement to fair price shop, distribution in next three weeks is a problem. Also will the fair price shops all have enough stock? How will poor people deal with these three weeks?” he asked.
The pessimissm was best expressed by markets expert Ashwani Gujral. He told the channel, “It is better not to expect much economic relief. During such times, the government primarily tries to please the voters.”
So, what impact will finance minister's initiatives have on the market?
Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Shares & Stock Brokers, said the move was focused mostly towards rural poor and was positive for consumption as a theme, but mostly low-priced products.
Hajra was overall positive about the package. “Rs 1.7 lakh crore is about 0.8 percent 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.”
Seconding Hajra, Nippon India Mutual Fund’s Manish Gunwani said the market will be more eager to hear what the RBI brings in.
Niranjan Hiranandani, President of ASSOCHAM and NAREDCO welcomed the relief package stating, “These initiative aims to provide a buffer and facilitate the basic needs of economically weak people who have no other means of being shielded from the crisis.”
He commended the “widely covered” unorganised sectors including agrarian and construction labourers, and EPF contribution by government for the organised sector. “These will play an important role in ensuring that the bottom of the pyramid is able to handle the challenges of the lockdown,” he noted.
He however added that other segments looking for measure such as EMI waivers and extension of loan scheme tenures will be on wait and watch mode.
Stock brokers Prabhudas Lilladher believes the “attempt is clearly aimed at saving the real economy from getting devastated due to corona virus led lockdown.”
“We estimate that the impact would be close to 1.2 percent of GDP. While the markets might be disappointed due to lack of immediate package for financial and banking sector, the move will benefit companies aimed at daily consumption items like Food, Biscuits, home care, milk,” they stated.
The broker also said unconventional monetary measures by the Reserve Bank of India (RBI) such as LTROs, reduction in CRR, relaxation in the classification of NPAs, special lending schemes in order provide relief to stressed sectors are “not ruled out”.
State Bank of India Chairman Rajnish Kumar called the package “timely and well intentioned” adding: “Overall it’s a very well defined package reinforcing government’s intent that no one should be deprived of basic facilities in today’s stressed times. We are hopeful of more calibrated responses in coming weeks as the impact of pandemic unfolds.”
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Overall experts felt the moves were good for the common man, but markets and industries would have to wait and watch.
As per the announcement by Sitharaman, beneficiaries of the National Food Security Act will get an additional 5 kg of rice or wheat above the existing 5 kg provision for the next three months, along with 1 kg of preferred pulse for each household under the PM Gareeb Kalyan Anna Yojana.
She also announced medical insurance cover of Rs 50 lakh each for healthcare workers, which is estimated to benefit 20 lakh beneficiaries.
For farmers Rs 2,000 each upfront as their first instalment under the PM Kisan Yojana; while wages for labourers have been hiked by Rs 2,000 per worker under MNREGA; eight crore below poverty line (BPL) families will get free LPG cylinders, the finance minister added.
For senior citizens, widows and physically challenged Rs 1,000 would be disbursed through direct benefit transfer (DBT). States have also been asked to use the Rs 31,000 crore Building and other Construction Workers' Fund (BOCW) to provide economic relief to construction workers.
For the organised sector, the Centre will pay the Employees Provident Fund (EPF) contribution of both employers and employees (total 24 percent) for the next three months for certain eligible companies.
