After a protracted wait, India has got a Prime Minister who has risen from the ranks and hails from the majority of the poor. The other redeeming feature is that PM Narendra Modi leads a party that has an absolute majority in the Lok Sabha. This makes a happy combination. It ensures that every policy decision taken by the present dispensation is guided by the overriding concerns of the poor and the common man of India and seeks to benefit them. At the same time, the absolute majority of the ruling party ensures that people-friendly legislations (for instance, the Bill giving statutory backing to the Aadhaar card) have a smooth passage in the House.
Demonetisation, announced on November 8, 2016, was meant to help the poor Indians by taking away the illegal wealth stashed by the hoarders of black money and using that to fund the development projects and welfare schemes of the Government. It caused some disruption in activities which are based on cash viz. small and medium enterprises (SMEs) and agriculture.
In his New Year’s eve 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 the hardships of the “marginalized”sections of society, increase their income and augment their capacity for a better living.
For SMEs, the Prime Minister increased the credit guarantee limit by the Deposit Insurance and Credit Guarantee Corporation (DICGC) from the existing Rs 1 crore to Rs 2 crore and the 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 the guarantee offered by the DICGC.
These relaxations will put small businesses (including start-ups) in a better position to take risk and absorb shocks due to adverse changes in 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.
For enterprises with an annual turnover of up to Rs 20 million and conducting all of their transactions in digital mode, the applicable profit for “presumptive” tax will be reduced from the existing 8% to 6%. While helping them via a substantial reduction in tax liability, a collateral gain will be a push towards digital economy and a concomitant reduction in scope for the generation of black money.
HELPING FARMERS
Farmers facing the cash crunch (courtesy, the demonetisation) have been granted interest subvention for two months on crop loans taken for rabi (2016-17) sowing. Further, district cooperative banks (DCBs) will be given an additional Rs 20,000 crore (in addition to Rs 21,000 crore granted in November, 2016) for lending to farmers at a subsidized rate. The NABARD will be “directly” compensated for this.
During the next three months, the kisan credit cards (KCCs) of 30 million farmers will be converted into RuPay cards. Unlike the KCC, wherein the farmer has to go to a bank to avail himself of credit, the RuPay offers the flexibility of making payments wherever needed. This will enable timely procurement of inputs viz. fertilizers, seeds and pesticides.
Under the Pradhan Mantri Awas Yojana (PMAY), the Government will provide an interest subvention of 3% on a loan of up to Rs 200,000 for building a house (or extension of an existing house) in rural areas and increase the number of houses to be built by 33%. In urban areas, those taking loans of up to Rs 900,000 will be eligible for an interest subsidy of 4% whereas for loans of up to Rs 12,00,000, they will get a 3% subsidy.
In a scenario wherein there is an acute shortage of homes and the capacity of middle and lower-middle class people is hampered by the 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.
WOMEN WELFARE
In a major push to women welfare, PM Modi announced the pan-India application of the Indira Gandhi Matritva Sahyog Yojana (IGMSY), which was until now a pilot project limited to 53 districts. Financial assistance under this scheme has also been increased from Rs 4,000 to Rs 6,000. This will address the plight of pregnant women and in turn, help in reducing the maternal and infant mortality rate.
Senior citizens depend a lot on interest income from fixed deposits for meeting their livelihood needs during their old age when they do not have a job or any other source of regular income (due to the sheer physical limitation). In a scenario of the declining bank interest rate, the Government has assured them a guaranteed interest @8% on their deposits of up to Rs 750,000 for 10 years. The interest will be given to them on a monthly basis.
The aforementioned measures are very much in sync with the overarching philosophy of the Prime Minister to give long-term benefit to poor and underprivileged Indians 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 for 2017-18 to be presented on February 1, 2017 as already alluded to by Modi while announcing the PM Garib Kalyan Yojana (PMGKY) using tax proceeds from “unexplained” deposits made in banks during the November 10 – December 30, 2016 period following demonetisation decision on November 8.
Team Modi deserves full praise for its continuing efforts in the service of the underprivileged and downtrodden sections of Indian society.
(The author is a policy analyst based in Delhi. The views expressed are personal.)
Published on January 24, 2017
http://bureaucracytoday.com/latestnews.aspx?id=172644