Modi's speech a balm for demonetisation pain, PM doles out sops for weaker sections

Prime Minister Narendra Modi has announced interest rate subsidy for housing of the poor and also waived off interest rate for farmers, in an effort to address the pain endured by the weaker sections of the society following his demonetisation decision. However, Modi did not provide any clarity on the note ban exercise or its impact on the economy. [caption id=“attachment_3182698” align=“alignleft” width=“380”]  Narendra Modi gestures as he addresses the nation on New Year’s Eve, PTI[/caption] In a televised address on Saturday evening, Modi praised the spirit shown by Indians and their sacrifice in fighting black money. “The problems which the people have faced for the betterment of the country is an example in itself,” Modi said, in the speech aired all over the country. The demonetisation of Rs 500 and Rs 1,000 currency notes from 9 Novmeber — as much as 86 percent of currency in circulation — created a cash crunch in the country, as the government and RBI were not ready with the replacement currency. Even after 51 days, banks and ATMs are still not replenished with enough cash to meet the demand from the customers. The non-availability of cash in hand has resulted in a slump in the economy, as scores of informal sector jobs have been lost and consumption declined. The sops announced on New Year’s Eve may come in this context. In an effort to balance out the pain for the poor, who have been the worst-hit, the prime minister announced two new housing schemes. According to the first scheme, for home loans up to Rs 9 lakh in urban areas, an interest rate subsidy of 4 percent will be given, and for loans up to Rs 12 lakh, the subsidy will be 3 percent. Secondly, for the rural poor, Modi announced a 3 percent interest subvention for loans up to Rs 2 lakh. Apart from this, for farmers, the government will bear a 60-day interest for loans taken from primary credit societies and district cooperative banks. The third scheme is the increase in the credit guarantee for the small traders to Rs 2 crore from Rs 1 crore. The note ban has broken the MSMEs as the sector has witnessed a decline in business post the demonetisation announcement. The increase in the credit guarantee is an effort to address their pain.