Round II fiscal cost: ~10,000 cr
Of the ~3.16 -trillion package announced by Finance Minister Nirmala Sitharaman on Thursday, the Centre’s immediate fiscal cost will be close to ~10,000 crore, a top government official told Business Standard.
The Centre’s direct spending vis-à-vis the second round of announcements will include ~3,500 crore on providing free foodgrain to 80 million migrants for two months and ~1,500 crore interest subvention on Mudra loans below ~50,000. Sitharaman specified these two points. What she did not mention was that ~4,500-5,000 crore would be immediately released by the Centre for the credit-linked subsidy scheme (CLSS) for middle-income groups to enable them to buy affordable housing. The scheme has been extended by a year to March 31, 2021. Sitharaman said it would lead to investment of over ~70,000 crore in housing.
“We will immediately release ~4,500-5,000 crore to banks for the CLSS,” the official said after the finance minister’s briefing.
The official added that while these were the immediate fiscal costs, all the credit schemes of Wednesday and Thursday on which the government would be providing guarantee might become a future liability for the Centre.
Analysts across the board calculated the immediate fiscal impact of Thursday’s announcements at around ~5,000 crore. However, there is a greater disagreement on the fiscal impact from Wednesday’s announcements worth ~5.9 trillion. While Soumya Kanti Ghosh, chief economic advisor, State Bank of India, pegged it at ~41,500 crore, Ranen Banerjee of PWC India estimated it at slightly less than ~20,000 crore.
The official quoted above said the Centre’s fiscal impact, not counting the future liabilities, from Wednesday’s measures, were close to ~40,000 crore.
What all analysts agree on is that given the Centre’s fiscal situation, it had no choice but to announce the bulk of measures on liquidity and credit front, while keeping its own outlay at a minimum.