Demand for huge stimulus package mounts as India intensify battle against Covid-19

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Demand for a stimulus package to support people and businesses trampled by the novel coronavirus pandemics is mounting as the India is gearing up to intensify its battle against the virus spreading fast in several pockets across the country.

 

A survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) finds the need for a stimulus package of Rs 9-Rs 10 lakh crore to help the businesses recover from the impact of the coronavirus crisis and the ongoing nationwide lockdown.

Apart from this, there are also millions of people, who have lost their livelihoods because of the countrywide lockdown in force since March 25, to be taken care off. Experts feel that a vast section of this people will find it difficult to survive the crisis as they have no savings.  

Subhash Chandra Garg, a former secretary in the department of economic affairs, feels that the government will need to provide at least Rs.2000 a month for three months to this section, which accounts for about 100 million. This will require a financial allocation of Rs.60, 000 crores.

The welfare package announced by Finance Minister Nirmala Sitharaman earlier was for non-workers. It did not consider those who have lost jobs due to the lockdown. He said that the lockdown will have serious consequences on these people.

“We cannot allow the people, who have lost jobs and have no savings, to suffer,” Garg was quoted by Hindustan Times as saying. He also proposed a fiscal stimulus to businesses, amounting to 2% of GDP, which works out to about Rs 4 lakh crore. Garg had argued in a blog post that India would lose about 4% of GDP (Rs.8 lakh core) during the lockdown.

Other economic experts and business leaders have also pitched for a massive stimulus package to tide over the crisis. Former chief economic advisor Aravind Subramaniam has pitched for a stimulus package of Rs.10 lakh crore, an amount equivalent to 5% of India’s gross domestic product, to deal with the disruption caused by the pandemic.

This money to be injected for relief and rehabilitation across all levels of the economy including people at the bottom of the pyramid, informal workers, micro, small and medium enterprises and large corporates, the HT report said.

It quoted Subramanian as recommending five ways of financing additional expenditure over a period of one year, including borrowing directly from the Reserve Bank of India (RBI) or monetising debt.

In an article by Business Standard on Thursday, Subramanian, along with Johns Hopkins University Professor Devesh Kapur, said the “controversial” suggestion of monetary financing or the central bank “printing money”, that is, directly buying G-Secs and state government bonds could fetch Rs 1-1.5 lakh crore to finance the stimulus.

The government may have to mobilise resources by raising taxes and cutting subsidies, giving an additional Rs 1-1.5 lakh crore. He also suggested foreign borrowing, from official sources and NRIs of about Rs 1-1.5 lakh crore. Reducing other expenditure could also yield a similar amount.

Meanwhile, FICCI has suggested setting up of a 'Bharat Self-Sufficiency Fund' with an outlay of Rs 2 lakh crore. It said that the fund could be used to promote scientific research and innovation for building a stronger and resilient nation and creating self-sufficient industry clusters with fully developed value chains within the country for products where India has high import dependence (with inputs from media reports)

Image Credit: National Herald

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