NEW DELHI:
Finance Minister Nirmala Sitharaman on Thursday announced a new job creation scheme by giving subsidy to those establishments that make new hires.
Addressing a press conference to announce more stimulus measures to boost growth, she said id the Indian economy is witnessing a strong recovery after a long and strict lockdown.
The government will spend Rs 1.2 trillion rupees ($16.1 billion) on the latest stimulus program in addition to the Rs 1.45 trillion announced on Wednesday, taking the total stimulus announced so far including that by the central bank to 15% of gross domestic product, Sitharaman said.
Rs 900 crore grant for COVID-19 vaccine research
A Rs 900 crore grant to the Department of Biotechnology for COVID-19 vaccine research was also announced by the finance minister.
She said the grant does not cover the actual cost of vaccine and distribution expenses, which will be made separately as and when the vaccine is available.
She also said that Rs 10,200 crore additional budget outlay will be provided towards capital and industrial expenditure for domestic defence equipment, industrial incentives and infrastructure and green energy.
Latest measures included additional funding for real estate developers and contractors, fertiliser subsidies, a new employment scheme and additional spending on the rural jobs scheme among other initiatives.India is planning to announce a fresh round of stimulus amounting to about $20 billion this week to help pull the economy out of its historic contraction, government officials told Reuters on Wednesday.
The subsidy would be to cover for retirement fund contributions by employees as well as employers for two years, she said.
Employees contribution (12 per cent of wages) and employer's contribution (12 per cent of wages) totalling 24 per cent of wages would be given to establishments for two years, she said.
Under the Aatmanirbhar Bharat Rozgar Yojana, every Employees' Provident Fund Organisation (EPFO) registered establishment taking new employees would get this subsidy.
The scheme will cover any new employee joining employment in EPFO-registered establishment on monthly wages less than Rs 15,000.
It would also cover EPF members drawing monthly wages of less than Rs 15,000, who made an exit from employment during COVID-19 pandemic from March 1, 2020 and is employed on or after October 1, 2020.
The scheme would cover establishments registered with EPFO if they add new employees compared to the reference base of employees as in September 2020.
The condition would be adding a minimum of two new employees for establishments with up to 50 employees. Those establishments with more than 50 employees, would have to give a minimum of five new jobs.
The scheme would be operational till June 30, 2021.
Tax relief on sale of housing units
Finance Minister also announced relaxations in income tax rules to allow sale of primary residential units of up to Rs 2 crore value below the circle rate.
Till now, only 10 per cent difference between the circle rate and the agreement value was allowed.
To boost residential real estate sector, she said the differential has now been increased to 20 per cent for period up to June 30, 2021 for only primary sale of residential units of value up to Rs 2 crore.
"This measure will reduce harships faced by both home-buyers and developers and help in clearing the unsold inventory," she said.“We expect that the announcement will help generate jobs, oil the engine of the economy,” said Naveen Kulkarni, chief investment officer at Axis Securities.
He said an increase in tax collections for goods and services, higher energy consumption, a rise in the purchasing managers’ index, improved bank credit and a stock market surge all suggested that stimulus measures taken so far had begun to help the economy bounce back.
The Indian economy, which the International Monetary Fund singled out as a global bright spot only a few years ago, was the worst performing major economy worldwide in the April-June period, contracting 23.9% amid a stringent lockdown to curb the spread of the pandemic.
The economy is expected to contract close to 10% in the fiscal year to March 2021. But Sitharaman noted that the Reserve Bank of India had predicted a strong likelihood that the economy may begin to show growth in the ongoing fiscal third-quarter.
Meanwhile, Moody’s Investors Service said on Thursday it expects India’s economy to shrink by 8.9% in the 2020 calendar year due to the COVID-19 pandemic, compared to an earlier forecast of a 9.6% contraction.
The revision comes as a rise in novel coronavirus cases slows in the world’s second-most populous country, and economic activity picks up after a 23.9% contraction in April-June, when consumer spending, private investments and exports collapsed during one of the world’s strictest lockdowns.“The steady decline in new and active (COVID-19) cases since September, if maintained, should enable further easing of restrictions. We, therefore, forecast a gradual improvement in economic activity over the coming quarters,” Moody’s said in a note.
In September, Moody’s had forecast the economy to shrink by 9.6% in the 2020 calendar year.