Government planning another package to revive growth of coronavirus-stung economy
What's the story
The government plans to set up a fund with a corpus of Rs. 50,000-75,000 crore to revive industries, that have been battered due to the coronavirus pandemic. Several labor-intensive units have come to a halt, courtesy the COVID-19 disease, which is highly contagious. To keep a check on transmission, the government announced a 21-day lockdown, that hit economy the hardest. Here are more details.
Plan
Government wants to keep wheels of economy moving
Two officials told HT that a part of this corpus will be funded by cess that the government plans to impose on commodities like fuel. "The purpose of the fund is to provide low-cost money to industrial units, particularly micro, small and medium enterprises (MSMEs), for their immediate working capital requirements so they can expeditiously complete pending orders and receive payments," one person said.
Priorities
Containing disease is the first priority
The second official said the nuances of this plan are being worked out and it will be announced at an appropriate time. According to the officials, the government's first priority is to contain the disease's spread and the second priority is to provide food and amenities to the poor. Reviving the economy is the third topic on the list, though it's absolutely important.
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Protecting livelihoods can wait, but it's important
"While the first two are immediate priorities, the third can wait for some time. However, protecting livelihoods is equally important and an economic stimulus package is a certainty. It is expected to be announced after a decision on the lockdown is taken," one official said.
Economy
Economy was suffering even before pandemic hit India
Even before the pandemic hit India, economic growth had come to a standstill. The budget projected the growth to be 5%. In 2020-21, the growth won't see a boost either, with Fitch Ratings expecting it to be 2%. Ram Singh, a professor at the Delhi School of Economics, opined the government should announce a package after the COVID-19 curve starts flattening in 2-3 weeks.
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Singh predicted that soon inventories will run out of stock
"Currently, the government should focus on two things—(putting) cash in the hands of the poor and supply of food to them. But soon inventories of food and medicines will be exhausted, hence there should be a calibrated reopening of certain essential sectors," Singh said.
Demand
Separately, FICCI thinks economy needs a big push
Meanwhile, the Federation of Indian Chambers of Commerce and Industry (FICCI) has said the economy needs an influx of Rs. 9-10 lakh crore, which accounts for 4-5% of the GDP, to recover from the coronavirus induced problem. FICCI said other countries have also done the same. The body urged the government to set up a 'Bharat Self-Sufficiency Fund' having an outlay of Rs. 2 lakh crore.
Looking back
Sitharaman had announced a package for the poor last month
To recall, after the lockdown began on March 25, Union Finance Minister Nirmala Sitharaman had announced a package of Rs. 1.7 lakh crore to help the poor. She also relaxed rules related to loans for common citizens. And a day later, the RBI put Rs. 3.74 lakh crore worth of liquidity into the system and cut policy rate by 75 basis points.