20 lakh crore package released by PM Narendra modi ji
Greetings friends!!
Our Prime minister, on 12th May, 2020, at 8:20 PM- that is at 20:20 announced a 20 lakh crore economic package in his speech of 20 minutes Thank heavens this announcement was not made during a 20-20 cricket match The Prime minister merely announced it, after which our Finance minister divulged the details of the package part by part over the next five days Come, let us find out what this package of 20 lakh crores holds for you for a common man and for the middle class people What are its benefits and disadvantages?
And is the 20 lakh crore package really worth 20 lakh crores? We will find out about all of this in today's video And I will also explain some complex economic terms like fiscal stimulus and liquidity injection in today's video Come, let us see When you hear 20 lakh crore rupees, then you might assume that this means that that the government will spend 20 lakh crore rupees from its coffers to aid the public But it is not so In order to comprehend this, you will first have to understand that there are two kinds of policies in economics- monetary policies and fiscal policies The monetary policies are framed by a country's central bank RBI is the central bank in India Monetary policies basically involves fluctuating the interest rates change the supply of money in order to control inflation This is done by the RBI The other policy is the fiscal policy which is made by the government The government alters its spending-
which areas to spend more, alters the tax rates These are the fiscal policies The monetary policies are decided by the RBI and the RBI is independent of the government that is technically- in theory And the government formulates fiscal policies 8 lakh crore rupees out of the 20 lakh crores is a liquidity infusion by the RBI We will talk about what liquidity infusion is in the video ahead But the point is that since it is a measure taken by the RBI, it classifies as a a monetary package The problem is that in 20 lakh crore rupees of economic package rolled out by the government It is incorrect to count the monetary package of the RBI It is unfair to do this
Because whenever we have talked about the economic packages of the countries across the world, we considered only fiscal packages When we said USA rolled out a 2 trillion dollar economic package- it only meant fiscal package entailing what actions and decisions the government took there Germany rolled out a package of almost 190 billion dollars That too, was a fiscal package But the Indian government combined the monetary and the fiscal package together to show that the "government" had rolled out a package of 20 lakh crores At the outset, let us talk about the 8 lakh crores set to come in from the RBI This money will come from the reserves of RBI It is called a liquidity infusion because in economics, "liquid" means converting any asset into cash which will make its buying and selling easier The money lying in the reserves of RBI was not in use in the economy It is simply laying there When RBI will make its reserves liquid,
then it will seep into the economy and the people will be able to sell or buy it once it will be converted into cash The RBI will do this by lowering its interest rates so that the rest of the banks that take loans from the RBI are able to avail loans for lesser interest And when they take loans at lower interest rates, they would be able to loan out to the companies and people at a lower interest as well And in this way, the extra money of 8 lakh crore rupees with the RBI the reserves of the RBI would be injected into the Indian economy basically The money would first go to the banks and then reach the companies and the people
The money would come into the economy in the form of loans So the loans that RBI gives to the other banks and the interest rates that it charges them is called repo rate You must have heard in the news that the RBI is cutting down the repo rate Because this is the only way- through the process that I explained- RBI would slash its interest/repo rate the other banks would be able to avail cheaper loans and this is how money would be infused in the economy
This is a very simplified explanation that I have put before you for you to understand So basically the point is that the 8 lakh crores from the RBI would have negligible effect on the end consumer So, out of the 20 lakh crores, 12 lakh crores remain which is the fiscal package from the government Out of this 12 lakh crore, the government had already announced 1.7 lakh crore in the previous package That is being recounted in this And there are several other things in this remaining corpus that the government has already announced earlier but they are recounting it in this 20 lakh crore package An article in the
New Indian Express tells us in detail the schemes that the government had already announced but were recounting it in this 20 lakh crore package For example, the PMMSY yojana which the government had announced in the 2019 union budget Let us get a section by section overview to find out what this economic package entails First, for the MSMEs- Micro, small and medium enterprises- The government has decided to dole out collateral free automatic loans worth 3 lakh crore rupees The companies would definitely benefit- but keep in mind- this is a loan Money is being loaned out and not given out There would be a liquidity infusion worth 90,000 crore rupees for the power distribution companies It is a loan/loan guarantee in a way and it is being expected that the power companies would pass on the benefits to the consumers Our farmers would be given a concessional credit of 2 lakh crore rupees
This, again, is giving out loans at lower interest rates A special credit facility worth 5,000 crore rupees has been provided for the street vendors This too, means giving out loans to them A supply of free food grains will be provided for the migrant workers for the next two months which would cost around 3,500 crore rupees and the government claims that this will benefit 8 crore migrant workers One nation, one ration card will also be implemented by May 31st, 2021 This is a good news but it is yet to be seen how much of it is implemented on ground The government has also said that the migrant workers returning would be given employment under MNREGA But have you observed how most of the things in this economic package are loans, loan guarantees or credit facilities? Basically, the people and the companies are being given out loans at lower interest rates or without collateral
There is nothing wrong with this- it would definitely benefit some companies and some people But at the end of the day, there are merely loans being given out Today, the person who does not have a job and is not able to bear his expenses will be able to sustain himself today with the help of the loans but someday, he will have to pay it back So, overall, in the long term, this is not reducing the pressure or the stress upon the public A lot of people- Atleast I had expected that the government would transfer money directly into the people's accounts so that they would be benefited today- not that loans would be doled out with an expectation of repayment The situation today has developed due to the lockdown by the government It was necessary but not all the burden should be piled up on the people Furthermore, such things have been counted in this economic package of 20 lakh crores which is basically your money
For example, TDS reduction by 25% What benefit does it impart? None, actually. Just that at the moment, you would get more liquidity in TDS, but, overall, you wouldn't get a lot of money Similarly, EPF contribution has been reduced to 10% from 12% This too, was your money that you were going to access later But slashing that today would mean that you are borrowing that money from the future This is basically the public's money being given out to the public and being counted in 20 lakh crores So a question would arise here is that 8 lakh rupees is from the RBI loans would be provided worth this lakh crores old schemes worth this lakh crores are being counted by the government our own money worth this lakh crore is also being counted So how much money is the government actually spending for the benefit of the people, out of the 20 lakh crores?
The right answer of this is anywhere between 1 lakh crore and 2.7 lakh crore Different people have made an estimation of this Yogendra Yadav ji claims that this amount would be 1.7 lakh crore rupees out of 20 lakh crore rupees which the government will actually spend Barclays is a famous financial services company of England It has made an estimation that this amount is 1.5 lakh crore rupees Care ratings has made an estimation that this amount is 2.73 lakh crore rupees HSBC India claims that this amount is around 1% of India's GDP and not 10% of India's GDP that is, around 2 lakh crore rupees out of 20 lakh crore rupees So where is the 1-2 lakh rupees (that the government is actually spending) being spent? Out of this, 40,000 crore rupees would go to MNREGA which is good, in my opinion 3,500 crore rupees would be spent on buying foodgrains for the migrants, as stated earlier which is another good thing as it would aid them Out of this, 8,000 crore rupees would be utilized in Viability Gap Funding
That is, those projects that are not economically viable but are projects of social infrastructure which the country needs- for example, constructing roads in a village You can see the entire list here Overall, in my opinion, there is negligible benefits for the salaried middle class people Furthermore, the government took some major decisions like privatizing the coal sector privatizing the defence production privatizing the power distribution and privatizing the space sector Now, I don not adhere to whether privatization in these sectors is a good or a bad thing Whether the decision was good or bad will be revealed by the implementation
In my opinion, if I were to summarize this entire economic package as an example, then this is a situation wherein you assume your friend needs 1,000 rupees from you He asks you for 1000 rupees to run his household since he does not have money You hand over the money to him in an envelope and he opens it and sees that he has only got 200 rupees instead of 1000 But you insist that you have given him 1000 rupees He asks you how because he an only see 200 rupees Then you tell him- Look, my parents gave 500 rupees to your parents yesterday Count that in this
Two months earlier when we went to eat in a restaurant, then I had paid your bill worth 200 rupees This makes it 700 rupees Then, there are 100 rupees in your wallet. Count that too- This amounts to 800 rupees And I just gave you 200 rupees And by the way, 100 rupees out of this 200 rupees is a loan that you will have to pay back Alright?
So this is your package of 1,000 rupees I've given you 1,000 rupees- Now, go and have fun This is the situation that our government has done with us in this package of 20 lakh crore rupees But this is my opinion. Do tell me you opinion. Is there something in this package that I have missed out ? Do write down your opinions in the comments below
If you liked this video, then share it. Help this information reach out to the public Talking about solutions, then most of the experts have suggested that the government will have to transfer money directly into the hands of the people so that the people have money and the demand in the economy rises so that more goods are bought and only then can the GDP rise This is the only way to revive the economy
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