Key takeaways from PM Modi’s New Year Address

The New Year address by the Honourable Prime Minister on 31st December was special in more ways than one. It was, probably, the first time that a prime minister was addressing the nation directly on the eve of a new year. It also came in the immediate aftermath of the Demonetization drive, which by initial estimates has been a phenomenal success. The New Year address was also likely to be a prelude to the budget and that is what the speech largely was. It virtually set the tone for the forthcoming Union Budget 2017-18. If the New Year speech was any indicator, the Union Budget is largely going to focus on the theme of digitization, delivery of benefits to the poor and middle class and a big push to agriculture. Here are the key takeaways from the Prime Minister’s New Year address…

First and foremost, the PM plans to take the demonetization exercise to its logical conclusion by waging an all-out war against black money. This could have a variety of implications. There might be more rounds of demonetization in future if warranted. The government may also expedite the next steps to crack down on the black money that is extensively stored in benami properties. The government may also look to demonetize black money stored in the form of gold. Additionally, a mix of smart technology, sophisticated financial intelligence and constant vigilance will be used to create a big disincentive for black money.

Apparently, the rural people and urban lower middle class had to bear the brunt of the travails of demonetization. The PM has decided to alleviate their problems with a variety of measures to empower them. The big focus of the speech was to empower the poor and lower middle class to buy their own house. There will be an exemption on interest on home loans of 4% in case of loans up to Rs.9 lakhs and an exemption of 3% in case of loans up to Rs.12 lakhs. PM has also announced a 33% increase in allocation to build houses in rural areas.

The PM’s speech also identified the Indian farmer as its central focus. To begin with, the government will go ahead and convert the 3 crore Kisan Credit Cards currently in circulation into RuPay cards. This will enable transactions even without the involvement of a bank as the card will now become an E-Wallet. This will permit farmers to pay for most of the requirements using these RuPay cards. Instead of writing off farmer’s loans, as in the past, PM in his speech announced that the government will undertake to pay 60-days interest in select farm loan cases. PM also announced doubling the NABARD fund to Rs.41,000 crore to enhance the spread of credit in rural areas.

Small and Medium enterprises (SME) segment plays a critical role in any economy. In India, it is the SME segment that generates the bulk of the employment. Developed nations like Germany have built their industrial might on the strength of small and family-owned enterprises which have eventually grown to become giants with government support. The PM’s speech also focused extensively on empowering the SME sector. To begin with the credit guarantee to the SME segment has been doubled to Rs.2 crore. Additionally, banks have been asked to raise their cash credit limits and working capital limits to SMEs to ensure that these businesses have the requisite money to grow their business. This could be a major bottom-up push to the Indian economy and could help a lot of SMEs come out of their liquidity trap.

When the NDA government rode to power, they had the unflinching support of the senior citizens and the women of India. The PM has also kept their interests in mind in his New Year speech. In India delivery-related fatalities are a big risk for the mother and the child. Mostly, it is due to poor nutrition, lack of medicines and poor pre-natal and post-natal care. To help mothers get a better deal, PM has announced a special transfer of Rs.6,000 directly into the accounts of pregnant women. This will be possible with the vast expanse of Jan Dhan accounts in the last couple of years. There is also something exciting for senior citizens. Those who depend on their pensions and investments to fund their sunset years are constantly worried about falling interest rates. PM has announced an assured 8% return on deposits by senior citizens up to an amount of Rs.7.5 lakhs. This should come as a major relief for the millions of senior citizens across India who depends on their investment to generate regular income. Coming on top of the OROP and 7CPC announcements, senior citizens will surely have a lot to cheer about!

It must be admitted that the speech and its contents were timed to perfection. It has addressed the needs of the most vulnerable sections of Indian society. Coming a day after the demonetization exercise ended, the speech was also designed to soothe the frayed nerves of the people in the aftermath of demonetization. The speech also served to underscore that the PM will take the fight against black money to its logical conclusion. That will be a big relief to the vast millions who put up with all the travails for the larger cause. Above all, PM Modi has set the tone for the forthcoming Union Budget. What the FM actually announces in the Union Budget on February 01st will be interesting to see!