It is a matter of deep satisfaction that after generations, India has got a prime minister who has risen from the ranks and hails from among majority of the poor. The other redeeming thing is that he leads a party that has absolute majority in Lok Sabha [lower house of parliament]. This makes a deadly combination.
It ensures that every policy decision coming from Modi is guided by the overriding concerns of the poor and the common man and seeks to benefit him. At the same time, absolute majority of BJP ensured that several people-friendly bills [for instance, bill giving statutory backing to Aadhaar card] had a smooth passage
Demonetization [announced on November 8, 2016] was meant to help poor by taking away illegal wealth stashed by hoarders of black money and using that to fund development projects and welfare schemes. It caused some disruption in activities which are based on cash viz. small and medium enterprises [SMEs] and agriculture. This also resulted in loss of jobs and displacement of casual workers.
[Much of this could have been avoided had SMEs and other business and industrial establishments in ‘informal’ sector, switched to non-cash mode of conducting their transactions including on e-platform taking a cue from Modi’s financial inclusion agenda initiated by him more than 2 years ago]True to his inherent nature and commitment to ameliorating the conditions of poor, in his New Year address to the nation on December 31, 2016, Modi announced a slew of measures. Unlike sops that most political dispensations are prone to giving, these steps are intended to mitigate hardships of the ‘marginalized’, increase their income and augment capacity for better living.
For SMEs, the government has increased credit guarantee limit by Deposit Insurance and Credit Guarantee Corporation [DICGC] from existing Rs 1 crore to Rs 2 crores and working capital [WC] limit from 20% to 25% [for borrowers transacting on digital mode, this will be 30%]. Non-banking finance companies [NBFCs] henceforth, will also be covered by guarantee offered by DICGC.
These relaxations will put small businesses [including start-ups] in a better position to take risk and acquire much needed resilience to withstand shocks if any, due to adverse changes in underlying economic circumstances. In particular, this will help those who do not come from a sound financial background but have requisite qualifications, capabilities and entrepreneurial instinct. Inclusion of NBFCs [they are in the business of giving loans to SMEs on a substantial scale] serves as an icing on the cake.
In yet another boost to SMEs, for enterprises with turnover up to Rs 20 million and conducting all of their transactions in digital mode, applicable profit for ‘presumptive’ tax will be reduced from existing 8% to 6%. While, benefiting concerned enterprise via substantial reduction in tax liability, a collateral gain will be by way of giving a push to digital economy and reduction in scope for black money.
Farmers who may have suffered due to delay in sale of their agriculture produce [courtesy, cash squeeze due to demonetization] have been granted interest subvention for two months on crop loan taken by them during rabi 2016-17. Further, district cooperative banks [DCBs] will be given an additional Rs 20,000 crores [in addition to Rs 21,000 crores given in November, 2016] by NABARD [National Bank for Agriculture and Rural Development] for lending to farmers at subsidized rate. NABARD will be compensated for this.
During the next three months, kisan credit cards [KCC] of 30 million farmers will be converted into RuPay cards. Unlike KCC, wherein the farmer has to be physically present in the bank to avail of the facility, RuPay offers him the flexibility to draw the cash at a place where needed and make payments. This will enable timely procurement of inputs viz. fertilizers, seeds, pesticide etc and smoothen crop cultivation operations.
Under Pradhan Mantri Awas Yojna [PMAY], government will provide interest subvention of 3% on loans up to Rs 200,000 for building a house [or extension of an existing house in rural areas] and increase number of houses to be built by 33%. In urban areas, those taking loans up to Rs 900,000 will be eligible for interest subsidy of 4% whereas for loans up to Rs 1200,000 will get 3% subsidy.
In a scenario wherein there is acute shortage of homes and capacity of middle and lower-middle class is hampered by high investment cost and interest burden, this will provide huge relief. Apart from catering to the needs of millions for affordable housing, this will also prop up investment activity on a massive scale in turn, boosting growth and adding to jobs and income.
In a major push to women welfare, Modi announced pan-India application of Indira Gandhi Matritva Sahyog Yojna [IGMSY], which was until now a pilot project limited to 53 districts. Financial assistance under this scheme has also been increased from Rs 4000 to Rs 6000 which will be provided in three installments. This will address the plight of pregnant women and in turn, help in reducing maternal and infant mortality rate.
Senior citizens depend a lot on interest income from fixed deposits for meeting their livelihood needs during old age when they do not have a job or any other source of regular income [due to sheer physical limitation]. In a scenario of declining interest rate, the government has assured them guaranteed interest @8% on deposit up to Rs 750,000 for 10 years. This will be given to them on monthly basis.
The aforementioned measures are very much in sync with overarching philosophy of prime minister to give long-term benefit to poor and under-privileged by garnering resources from all those [read hoarders of black money] who in the past did not pay taxes due from them and added to their wealth via illegal means.
More of such reliefs are expected in the union budget to be presented on February 1, 2017 as already alluded to by Modi while announcing PM Garib Kalyan Yojna [PMGKY] using tax proceeds from ‘unexplained’ deposits made in banks during November 10 – December 30, 2016 following demonetization on November 8.
Team Modi deserves full praise for its continuing efforts in the service of under-privileged and downtrodden.