Narendra Modi ends 2016 with a spirited defence of demonetisation (and some new schemes)

Happy new year.
Happy new year.
Image: Reuters/Shailesh Andrade
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Prime minister Narendra Modi’s much-hyped New Year’s eve speech was mostly a vigorous defence of demonetisation, sweetened with a side of schemes aimed at everyone from pregnant women and cash-strapped farmers to the elderly.

In a 45-minute address, Modi sought to thwart the barrage of criticism unleashed by his decision to demonetise Rs500 and Rs1,000 notes. The prime minister praised the Indian public for their resilience in dealing with the aftermath of the move, upbraided erring public servants and bankers, and reiterated his government’s commitment towards cleaning up the shadow economy.

Nonetheless, Modi did not provide any solid evidence of the success of the demonetisation exercise, such as the quantum of old notes returned to banks since Nov. 08. In effect, there is still little clarity on exactly how much black money has been taken out of India’s economy.

Modi’s speech also unveiled a collection of schemes—not unlike the budget, which is only a month away—that would assuage many of those jolted by demonetisation.

Here are the major schemes outlined by the prime minister today:

Housing for the poor

The government will launch two new schemes in 2017 to make it easier for the poor to access housing. First, the government will offer a discount of 4% on the interest rate for loans up to Rs9 lakh for low-income individuals building homes. For loans worth up to Rs12 lakh, the interest rate will be discounted by 3%. And in rural India, Modi promised a 3% interest waiver on loans up to Rs2 lakh for the construction of houses.

Modi also said that under the Pradhan Mantri Awas Yojana scheme the government will be increasing the number of houses being built for the poor in rural areas by 33%.

Benefits for farmers

The prime minister plans to introduce new schemes to help farmers get adequate access to seeds and equipment, as well as to reduce the burden of loan repayments. Farmers who have taken loans for winter (Rabi) and monsoon (Kharif) crops from district cooperative central banks will not have to pay interest on such loans for a period of 60 days. Those who have already paid will be refunded, Modi said.

On Nov. 23, the National Bank for Agriculture and Rural Development (NABARD) created a fund of Rs21,000 crore to help farmers sow winter crops. The government will now double the fund by adding Rs20,000 crore.

Benefits for pregnant women

In an attempt to curb maternal and child mortality in India, the government will transfer Rs6,000 into the accounts of pregnant women across 650 districts in India.

Fixed returns for senior citizens

Modi also promised that senior citizens in India will be assured a fixed annual interest rate of 8% on deposits worth up to Rs7.5 lakh for a period of ten years.


“Government of India underwrites loans given by banks to small businesses through a trust. So far, loans were covered upto one crore rupees. This limit is now being enhanced to 2 crore rupees,” Modi said. The scheme will not only cover loans extended by banks, but also non-banking financial companies.

Moreover, the banks will hike the credit limit for small industry from 20% of turnover to 25%. For enterprises that transact digitally, working capital loans will be raised from 20% of turnover to 30%.

Lastly, for businesses with turnover of up to Rs 2 crores, the tax liability for income from digital transactions will effectively reduce by 25%.