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Centre unveils new COVID recovery package, expands credit relief

Finance Minister Nirmala Sitharaman on Monday announced fresh relief measures for the economy, the first such package after the second Covid-19 wave. The measures focused largely on extending loan guarantees and concessional credit for pandemic-hit sectors, and investments to ramp up healthcare capacities.

The government pegged the total financial implications of the package, which included the reiteration of some steps that were announced earlier, such as the provision of food grains to the poor till November and higher fertiliser subsidies, at ₹6,28,993 crore.

Economists, however, noted that the elements of direct stimulus in the package and its upfront fiscal costs in 2021-22 are likely to be limited. More stimulus steps may be needed to shore up the economy through the rest of the year, they said.

Union Finance Minister Nirmala Sitharaman with MoS Finance Anurag Thakur are seen during a press conference, in New Delhi on June 28, 2021.

Calling the measures an effort to stimulate growth, exports and employment as well as provide relief to COVID-affected sectors, Sitharaman announced an expansion of the existing Emergency Credit Line Guarantee Scheme (ECLGS) by ₹1.5 lakh crore. She also announced a new ₹7,500 crore scheme to guarantee loans up to ₹1.25 lakh to small borrowers through micro-finance institutions.

She also unveiled a fresh loan guarantee facility of ₹1.1 lakh crore for healthcare investments in non-metropolitan areas and sectors such as tourism. A separate ₹23,220 crore has been allocated for public health with a focus on paediatric care, which will also be utilised for increasing ICU beds, oxygen supply and augmenting medical care professionals for the short term by recruiting final year students and interns.

Indirect support for exports worth ₹1.21 lakh crore over the next five years, free one-month visas for five lakh tourists, new seed varieties for farmers and additional outlays over the next two years to expand broadband to all Gram Panchayats, were also included in the package.

The existing sop to spur employment, where the government bears EPF contributions for new employees earning less than ₹15,000 a month for two years, has been extended till March 31, 2022.

“Setting aside the guarantee schemes and the announcements that had already been made earlier, the step-up in the fiscal outgo within 2021-22 based on the fresh announcements is estimated at around ₹60,000 crore,” said Aditi Nayar, rating agency ICRA’s chief economist.

Economist DK Srivastava reckoned that the additional burden on the 2021-22 Budget from the ‘three direct stimulus initiatives’ — providing free foodgrains, incremental health projects’ spending, and rural connectivity — would be ₹1,18,390 crore or about 0.5% of estimated GDP for 2021-22.