Another Round Of Stimulus Likely Before Diwali: Sources

The government is likely to announce another round of stimulus before Diwali, sources in the Finance Ministry told NDTV. The stimulus would focus on job manufacturing and a further extension of the Cabinet's decision to give a push to growth with production-linked incentive schemes, they added. The news comes at a time when the economy is on track to register its worst annual contraction in more than four decades, after the country's GDP crashed a record 23.9 per cent in the quarter ended June 30. 

The government had rolled out the first stimulus package, called Aatmnirbhar Bharat, to support the economy against the damage caused by the coronavirus pandemic-related nationwide lockdown in May. That package included monetary and fiscal support worth Rs 21 lakh crore, which the government said was equivalent to 10 per cent of the country's gross domestic product (GDP).

The government may announce subsidy for new employment as part of the next stimulus package, according to the sources. This subsidy could be in the form of PF contribution upto 10 per cent for both employees and employers.

The centre is planning to relaunch the 'Pradhan Mantri Rojgar Protsahan Yojna' which was closed on 31st March last year. Under the new version of this scheme, the government may announce subsidies for new employment for next two years.

If any new company get registered with EPFO (Employee Provident Fund Organisation) after a certain date, the government will give 10 per cent of PF contribution of the employer and 10 per cent of PF contribution of the new employee.

An employee who was registered with EPFO but exited during the covid period, will also receive the subsidy if he/she joins any company. This Scheme may be opened for those establishment who already registered with EPFO

According to the proposal, an employee whose salary does not exceed Rs 15,000 per month would be able to avail this subsidy.

An existing company may be asked to add at least two new employees if they have 50 or less number of employees, and if they have more than 50 employees then, at least 5 new employees may be needed to avail this subsidy. For new companies getting registered with EPFO, the reference base of employees may be treated as zero and employers can avail subsidy for all new eligible employees.

The government is considering providing subsidy for the next two years, although the scheme may be open for 6-7 months.

According to the sources, Ministry of Labour has finalised the proposal and it has been recently discussed at Prime Minister's office. There is a strong possibility of the proposal being added in the upcoming stimulus package, the sources added.

Meanwhile, Reuters has quoted sources to say that the Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman and other top officials will finalise the plan on Thursday.

The sources, who asked not to be named, did not provide details of the package besides saying that it would be targeted towards stressed sectors with a focus on generating employment, according to the Reuters report.

Earlier in the day, the Cabinet approved a Production-Linked Incentive (PLI) scheme worth Rs 2 lakh crore for 10 sectors in order to boost the country's manufacturing capabilities, and enhancing exports.

The scheme is aimed at making domestic manufacturers globally competitive, attracting investment and enhancing exports, the Information and Broadcasting Minister Prakash Javadekar told reported after a meeting of the Cabinet.

Production-linked incentives will be offered for sectors such as white goods manufacturing, pharmaceutical, specialised steel, auto, telecom, textile, food products, solar photovoltic and cell battery.

Finance Minister Nirmala Sitharaman had, last month, hinted at the possibility of a second stimulus package to revive the economy. Finance secretary Ajay Bhushan Pandey had also indicated, at the beginning of the month, that the government was working on another stimulus package but he refrained from giving a timeframe.

Last month, the Finance Minister announced a Rs 73,000-crore package, including advance part-payment of wages to central government employees and cash in lieu of leave travel allowance (LTC), to stimulate consumer demand and investment in the economy ravaged by the coronavirus pandemic.

The Reserve Bank of India has said that the economy is likely to contract by 9.5 per cent in the current fiscal. GDP contracted 23.9 per cent in the first quarter of the fiscal, as per the estimates of the Central Statistics Office (CSO).