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PM Modi's New Year's Eve bonanza to cost govt Rs 3,500 crore annually

The government will have to make an additional budgetary provision to the tune of Rs 3,500 crore to pay for the slew of welfare measures announced by Prime Minister Narendra Modi for the poor, pregnant women and farmers on the eve of the New Year, says a report.

“The overall fiscal impact of all these measures announced by the PM on December 31, will be around Rs 3,500 crore per year, which is minimal compared to the social and economic benefits,” SBI Research said in a note today. Modi announced a slew of schemes for multiple beneficiaries last Saturday, in a bid to soften the blow of demonetization drive between November 8 and December 30.

In what looked like a mini-Budget speech, Modi announced interest subventions for agricultural loans, financial assistance of Rs 6,000 for pregnant women and an increase in the number of houses being built for poor by a third, among others. The note said the interest subvention on agri loans will result in a fiscal burden of Rs 1,300 crore, schemes for women and children will be a fiscal drag of another Rs 1,200 crore and the benefits under the PM Awas Yojana will cost Rs 1,000 crore to Exchequer. Modi had announced loans of up to Rs 9 lakh taken in the new year under two new scheme — Pradhan Mantri Awas Yojana — will receive interest subvention of 4% and loan of upto Rs 12 lakh will get a 3% interest waiver.

For rural areas, the number of houses being built for poor will be increased by 33%. In addition, another scheme is being put in place for the neo-middle and middle- class in rural areas where loans up to Rs 2 lakh for new housing loans or extension will receive an interest subvention of 3%. Farmers will get 60 days interest waiver on crop loans taken for the Rabi sowing and those who have already paid will get back the money into their accounts to the tune of the 3% interest waiver. They will get even better access to loans from cooperative societies with the government adding Rs 20,000 crore to the Rs 21,000 crore fund created by Nabard last month.