Finance Minister Nirmala Sitharaman on Thursday announced a Rs 2.65 lakh crore stimulus package to prop up government spend and give relief to the industry. However, manufacturing PLIs constitute 55 percent of the package, which will not see any expenditure for the next three years at least.
Thus, the actual size of additional spend this fiscal is around Rs 1.20 lakh crore or a little over 0.5 percent of the gross domestic product (GDP) under Atmanirbhar Bharat 3.0.
Out of the Rs 1.20 lakh crore approximately 54 percent or Rs 65,000 crore is the additional allocation for fertiliser subsidy. The Expenditure Secretary, TV Somanathan, clarified to CNBC-TV18, "65,000 crore for fertiliser subsidy is over and above the budget estimate. Total expenditure in FY21 would be in the order of Rs 1.38 lakh crore odd for fertiliser subsidy."
The additional fertiliser subsidy announcement is a welcome surprise for the Department of Fertilizers and the industry as it aims to also clear the backlog of arrears. Sources say the fertiliser department had asked for a total of Rs 1.38 lakh crore last fiscal but the budget allocated only Rs 73,000 crore.
“With this additional Rs 65, 000 crore the rest of the gap which is the rolled over liability should be now bridged. Fertiliser industry had reached a break point with vast amounts of subsidy overdue,” sources explain. So much so, the government does not expect fresh rollover liability by March-end, thus wiping the slate clean on pending payments.
The next big ticket announcement is the launch of a new scheme, the ‘Atmanirbhar Bharat Rozgar Yojana’, to incentivise job creation during the COVID-19 recovery phase. The government estimates a maximum expenditure of Rs 36,000 crore over the next two years starting October 1 from this year.
However, between now to June end next year, that is the first year of the scheme, the actual spend is estimated at Rs 6,000 crore. This means additional spend for FY21 to incentivise employment could settle at a ballpark Rs 2,500 crore, depending on how many new joinees with a monthly income of up to Rs 15,000 come under the EPFO fold.
“We would be very happy if the entire Rs 36,000 crore is spent over two years as the aim is to create jobs. However, the actual spend will depend on how many join the EPFO. We don’t want to give an excess estimate so for the next one year we are looking at a Rs 6,000 crore spend , conservatively,” a government official explained to CNBC-TV18.
The next announcement is the additional outlay of Rs 18,000 crore for Pradhan Mantri Awaas Yojana for construction of houses in urban areas. This additionally is over and above the Rs 8000 crore budget and involves a combination of direct government spend and extra-budgetary resources to be raised by companies like HUDCO. The government estimates at least 2/3rd or Rs 12,000 crore will be spent from the budget this fiscal and the entire amount of Rs 18,000 crore is likely to be spent.
The government also expects the additional Rs 10,000 crore for rural employment and another Rs 10,200 crore for industrial incentives, infrastructure and domestic defence equipment to be fully utilised this fiscal, thus taking the total tab of estimated additional expenditure to at least Rs 1 lakh crore.