Indian Express Explained 27th March 2020

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1)Explained: Unpacking the Garib Kalyan package :which is the most significant component of the Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Yojana relief package announced by Finance Minister?

The increased entitlement of foodgrains supplied through the public distribution system (PDS) is a major intervention. A typical poor household having five adult members consumes 50-55 kg of cereals and 4-5 kg of pulses every month. Currently, the PDS provides 5 kg of cereals per person per month at Rs 2/kg and Rs 3/kg for wheat and rice, respectively. That is 25 kg for a family of five.

Under the package, an additional 5 kg of wheat or rice would be given per person per month, free of cost. The doubling of entitlement, effective for the next three months with the extra grain coming free, will practically meet the family’s entire cereal requirement. Roughly 80 crore persons or two-thirds of India’s population covered under the National Food Security Act will benefit.

Will enhancing daily wages under MNREGA by Rs 20, from an average of Rs 182 to Rs 202, help?

Not really, in a lockdown, where there’s little scope to undertake MNREGA works. In today’s context, all MNREGA households — a total of 13.65 crore job cards have been issued, of which 8.22 crore are active — should ideally be given an unemployment allowance.

The relief package also seems to have cash transfer components.

Yes, but not very substantial. A total of 20.4 crore of bank accounts belonging to women under the Pradhan Mantri Jan Dhan Yojana are to be credited Rs 500 each per month for the next three months through direct benefit transfer (DBT). That is hardly any recompense for those forced out of work. Nor is payment of Rs 2,000 to 8.7 crore farmers under the Pradhan Mantri Kisan Samman Nidhi anything to write home about.

2)Rate cut and loan-repayment moratorium: How RBI is trying to reduce pandemic stress:- The RBI’s Monetary Policy Commitee (MPC) on Friday (March 27) reduced the policy repo rate by 75 basis points to 4.4 per cent to help arrest the slide in economic growth in the wake of the COVID-19 outbreak.

The RBI governor announced a moratorium on term loans and indicated that deferment of interest payment will not result in asset classification downgrade, a major worry for small and medium businesses that have downed their shutters.

The RBI also allowed lending institutions, banks to defer interest on working capital repayments by 3 months — again a move aimed at addressing the distress among firms as production is down.

The RBI Governor also said banks may reassess the working capital cycle, and that they won’t be treated as NPA. The MPC voted with a 4:2 majority to cut repo rate by 75 basis points to 4.4 per cent.

Why did market fall?

Equities climbed off the day’s high after the RBI Governor said that India’s FY20 GDP growth forecast of 5 per cent was now at risk.

The RBI Governor also indicated that the large sell-offs in markets have intensified pressure. RBI will conduct LTRO (long term repo operations) of up to 3-year tenure of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate. The first auction of Rs 25,000 cr will be conducted later on Friday.


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