2nd stimulus package likely soon, says CEA
AT A MEETING, PM MODI DISCUSSED STRATEGIES AND INTERVENTIONS TO SUPPORT MSMES AND FARMERS, ENHANCE LIQUIDITY AND BOOST CREDIT FLOWS
NEW DELHI: The second economic stimulus package can be expected “very soon”, Chief Economic Adviser Krishnamurthy V Subramanian said in an interview on Saturday, although he declined to put a time-frame or a magnitude to it.
Prime Minister Narendra Modi met with home minister Amit Shah and finance minister Nirmala Sitharaman on Saturday in the context of a stimulus package and an official familiar with the matter said on condition of anonymity that in a series of meetings on this theme the PM has, over the past few days reviewed trade, commerce, coal and mining, defence, aviation, power, agriculture, and the education sectors. The focus of the package, when it is announced, will be making the Indian economy self-reliant and turning the current crisis into an opportunity, a second person familiar with the matter said, asking not to be identified.
The PM chaired a meet on strengthening the micro, small and medium enterprises (MSME). “Chaired a meeting on strengthening our MSME sector, which plays a pivotal role in economic development,” he tweeted. He discussed interventions in the financial sector and structural reforms needed to spur growth. At the meeting with the finance minister and other officials, he also discussed strategies and interventions to support MSMES and farmers, enhance liquidity and strengthen credit flows. The PM discussed ways to ensure financial stability and measures taken to enable businesses to recover quickly.
The ongoing Covid-19 pandemic and the lockdown enforced to slow its progress have roiled the economy. On Friday, the government announced a graded exit from the lockdown over two weeks starting May 4. However, in red zones, the most affected or most at-risk parts, many of the restrictions will continue.
“We have to keep in mind, this is not something that is specific to India, but a global pandemic. This is an extremely uncertain period, so any projection we make will have to be continually recalibrated as things evolve. IMF has said India will grow at 1.9% when the global economy is going to shrink at 3%... They put in several caveats as they should. Even with the Spanish Flu, there was a V-shaped growth after. With that in mind, overall, I would say between 1-2% of GDP is something I would think,” Subramanian said.
Meanwhile, the government has already received specific proposals of policy reforms and fiscal incentives from various stakeholders and industries but a final decision will be taken after careful assessment of various sectors of the economy, the two officials cited above said. Industry has proposed a comprehensive stimulus package worth ₹16 lakh crore, which includes welfare measures, policy reforms and fiscal concessions, to revive the economy. The Centre has come in for criticism over the delay in announcing a stimulus package.
Subramanian said that the delay was because of the Centre’s desire to come up with a “comprehensive” one. “Primarily, the work is on trying to make it very comprehensive. Not just in terms of the stimulus, but bringing in some reform measures as well. Policy-making is also about balancing different interests...”.
The primary focus was containing the spread of the pandemic, and providing relief to the poor, the two officials said. Now, the next big agenda of the government is to bring the economy back on track. “A stimulus is expected sooner than later...it will neither be the first stimulus, nor the last. The government will provide relief to every sector in a caliberated manner so that the limited resource can be utilised most effectively. The immediate focus would be on rural economy, informal sector, MSMES (micro, small and medium enterprises) and those big industries that would have rippling impact on the three...,” the first official said.
Subramanian, however, did not put a number to the possible package. However, he added that reports of a stimulus as much as 10% of the GDP in the US and 15% in the UK are exaggerated.
He also said that India can’t compare itself to the US .
“40-50% of the US population pays taxes while in contrast the number in India is less than 10%. We cannot cherry-pick some of these aspects...,’’ the CEA told Hindustan Times.