Port Wings, 20 May 2020:
The mega Rs 20-lakh crore stimulus package announced by Prime Minister Narendra Modi includes previously announced measures to save the lockdown-battered economy and focuses on tax breaks for small businesses as well as incentives for domestic manufacturing.
The combined package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world after the financial packages announced by the United States, which is 13 per cent of its GDP, and by Japan, which is over 21 per cent of its GDP.
The package includes Rs 1.7 lakh crore package of free foodgrains to poor and cash to poor women and elderly, announced in March, as well as the Reserve Bank’s liquidity measures and interest rate cuts. While the March stimulus was 0.8 per cent of GDP, RBI’s cut in interest rates and liquidity boosting measures totaled to 3.2 per cent of the GDP (about Rs 6.5 lakh crore).
Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of Covid-19. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity.
The package, he said, will focus on land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, labourers, middle class, and industries.
The Prime Minister did not share details saying Finance Minister Nirmala Sitharaman will over the next few days spell out details for each sector.
But going by the previous figures, it would seem that an additional Rs 12 lakh crore will be pumped into the economy.
There was expectation of more direct cash transfer to the needy (or allotting more in the NREGA fund which is seeing large off-take), but that did not come through. Instead, the focus was more on easy credit/ loans.
The package is seen as a government attempt to check the world’s fifth-largest economy hurtling towards its first full-year contraction in four decades. According to estimates, lockdown may have led to 12.2 crore people losing jobs in April and consumer demand evaporating.
Prime Minister Modi said that a self-reliant India will stand on five pillars viz economy which bring in quantum jump and not incremental change; infrastructure, which should become the identity of India; technology-driven system; vibrant demography; and demand.
Before Independence, not even a needle was manufactured in India but in 60 years, India became self-reliant in science, technology, agro business, defence, manufacturing and atomic science,
Finance Minister Nirmala Sitharaman’s announcement of a slew of measures for agriculture and allied activities as part of the Centre’s economic package came under fire from the Congress and the Left parties, which accused the government of repacking and re-marketing existing schemes
The worst sufferers of the coronavirus lockdown have been farmers and workers. But the government, instead of helping them, is pushing them into a debt trap. As they constitute the most vulnerable sections, which now bear the maximum brunt from one of the stringent lockdowns of the world, relief must be at a large scale.
Nobel Prize-winning economist Abhijit Banerjee, in a discussion with Mr Rahul Gandhi, said: “I would say bottom 60 per cent of the population, we give them some money, nothing bad will happen in my view”, adding that a similar practice was being followed by the United States.
The government is insensitive and is unable to address the current crisis. It talks of reforms. It is for the future. The issue is how the government is going to address the sufferings of farmers and daily wage workers.