Analysing The Third Tranche Of Economic Package

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Analysing The Third Tranche Of Economic Package
Deepika Asthana - 26 May 2020

Post economic package announcements for MSME, NBFC, real estate and power companies the government in its third tranche focused on agriculture and allied activities. The overall package announced was to the tune of Rs 1.63 lakh crore (this does not entail direct cash transfer). These measures are aimed at reforming the agriculture and allied sector by creating infrastructure to improve market access leading to better price realization. The aim is to standardise produce, enhance quality and create a conducive environment for private participation. The announcement also includes measures to enhance governance and administrative reform.

The government earmarked Rs. 1 lakh crore for agriculture infrastructure fund. The fund will be utilised for post-harvest management and the government has mentioned that it will set up this fund immediately. Rs 10,000 crore to be allocated for formalisation of micro size food companies. There are nearly two lakh such companies that will benefit. An amount of Rs 20,000 crore is allocated for integrated, sustainable and inclusive development of marine and inland fisheries. An amount of Rs ~13,300 crore has been earmarked for prevention of disease in livestock by providing vaccination to suck livestock. The government plans to set up an animal husbandry infrastructure development fund to the tune of Rs 15,000 crore. This will support private investment in dairy processing, value addition and cattle feed infrastructure. The government plans to amend the essentials commodities act thereby deregulating the certain agriculture products for better price realization.

A total of 30 million farmers have availed three-month moratorium facility to help them during these torrid times. The total outstanding loan of these farmers is nearly of ~ Rs 4.22 lakh crore. Interest subvention and prompt repayment incentive on crop loans due from March 1 to May 31, 2020. New Kisan Credit cards have been sanctioned to nearly 2.5 million farmers with a total loan limit of Rs 25,000 crore. State government entities have been sanctioned Rs 6700 crore as working capital limit to procure agriculture produce in these states since March 2020. These measure will have a long term positive impact on the sector.

This tranche of economic relief announcement is in line with the PM’s economic plan to ensure that the country is heading towards self-reliance. The measures announced will be a shot in the arm for the agriculture and allied sector as it may also help in doubling farmers’ income by 2022. While the earlier COVID-19 package was with the primary intent to survive the lockdown, these announcements are more reform oriented. This can have a positive impact on medium term growth expectations.

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