Understanding the Schemes Under the ?20 Lakh Crore Package Announced by Narendra Modi

On the announcement of the ?20 lakh crore package by PM Narendra Modi, many questions have surfaced about the sources of the funds and their implementation. This article delves deep into the details of the package, elucidating on where the money will come from and how it will be utilized to address the economic gap brought on by various crises.

Sources of the ?20 Lakh Crore Package

The package announced by PM Modi is expected to come from multiple sources, the most significant being loans, budget reallocation, and increases in various taxes. The basis of this package underscores the need for fiscal adjustment and reallocation of existing funds to meet the current economic exigencies.

1. Loans from Banks: A significant portion of the funds will be provided as loan guarantees to various sectors. Banks will be a crucial source of finance for this massive stimulus package, providing essential liquidity to businesses and industries.

2. Diversion of Funds from Other Schemes: The government intends to redirect funds from existing allocated schemes to support the economic stimulus. This redirection of funds is a critical component of the package, meant to ensure that no funding gaps exist in critical areas.

3. Borrowing and Cess: The government may also resort to borrowing or levying additional cess and taxes to generate the required funds. This includes increases in petrol and diesel prices to generate revenue and offset the cost of the stimulus package.

Impact on the Middle Class

One of the concerns raised regarding the stimulus package is its potential impact on the middle class. A significant portion of the funds will be in the form of guaranteed loans to Micro, Small, and Medium Enterprises (MSMEs), which may result in indirect tax increases. The middle class, who own MSMEs or are employed in such sectors, are likely to bear the brunt of the higher taxes and interest payments.

Printing Currency and Inflation

Another source of funding for the package is the printing of currency, which has been a contentious topic. While printing currency can lead to high inflation, the government's claim is that the economic benefits of the package should offset any inflationary pressures. However, whether the public, particularly the middle class, will bear the brunt of this inflation remains to be seen.

Reallocation of Government Expenditure

The government has emphasized that its actual expenses are relatively low compared to the GDP. Hence, the fiscal budget deficit can be managed through increased taxation or public borrowing by selling government bonds. The government may also reduce expenditures in certain non-essential areas to support the fiscal deficit.

Conclusion

Overall, the ?20 lakh crore package announced by PM Narendra Modi aims to reboot the Indian economy. While the sources of funds and their allocation are crucial, the implementation of the package will depend on how effectively the government uses the available resources. The middle class, particularly those in MSMEs, will play a pivotal role in the success of the package. As the economy continues to face challenges, the effectiveness of the package will be a critical indicator of India's recovery and resilience.