New Delhi: The Narendra Modi government is likely to announce “targeted stimulus packages” mainly for four sectors — micro, small and medium enterprises (MSME), small businesses, including shopkeepers and small traders, unorganised sector, and oil companies — to help reboot the economy hit hard by the Covid-19 crisis, ThePrint has learnt.
The Prime Minister’s Office (PMO) is holding detailed consultations with the finance ministry to thrash out the contours of the packages being planned — based on the suggestions given by the 11 empowered committees constituted by the government.
However, the amount of the stimulus packages being planned will not be “large” as the government has limited fiscal resources, government officials said.
“Consultations are at a fairly advanced stage. The PMO is meeting different stakeholders, including the Economic Advisory Council to the PM, to get their views,” said an official, who didn’t want to be named.
India is faced with a sharp increase in government expenditure for the battle against the pandemic even as revenues are expected to shrink due to the near halt in economic activities.
Economists expect the GDP growth in the first quarter to contract before improving. The full-year GDP estimates for 2020-21 range from a contraction to marginal growth of 1-2 per cent.
No respite for big firms
Government sources said the PMO is in touch with the 15th Finance Commission, which has already held meetings with different groups to discuss the post-Covid-19 requirement of the economy.
“No big bang financial package will be announced. The interventions will be targeted at sectors that have been the hardest hit such as small businesses and shopkeepers. There will be something for those in the unorganised sector, those whose livelihood have been impacted badly following the nationwide lockdown,” said a second government official, who did not want to be identified.
Additional relief for non-banking finance companies (NBFCs) is also being contemplated over and above the relief given by the Reserve Bank of India (RBI), said a third government official, requesting anonymity.
The official added that big firms are unlikely to get any relief, even those in the stressed services sector for now, including aviation and hospitality industries.
“That may have to be assessed at a later date,” he said, ruling out any immediate relief for these sectors.
“The government is likely to announce carefully targeted stimulus packages for specific sectors like MSME, NBFCs, unorganised labour and traders. The idea is to cover a large section of the population and to provide relief to sectors that generate employment,” the official said.
“Each of these sectors will get a fiscal stimulus package but the overall amount may not be large,” he said, adding the available fiscal resources with the government is limited.
The government is looking at a mix of market borrowing and monetisation of deficit to fund its expenditure, the official added.
Economic relief measures so far
Prime Minister Narendra Modi had announced a complete lockdown from 25 March to check the spread of the highly infectious Covid-19 disease.
The lockdown, which entered its 30th day Thursday, adversely hit economic activities, which came to a near halt with factories shutting work and labourers forced to leave for their villages.
Concerned over the economic fallout, the central government had announced certain economic relaxations by allowing select industries and businesses to resume operations from 20 April.
The government and the RBI have also announced a series of measures to provide temporary relief to many stakeholders.
While the government announced a Rs 1.7 lakh crore package comprising cash transfers and free food grains, the RBI declared a series of measures, including a 3-month loan moratorium for all term loans, cut in policy rates and additional liquidity for banks to fund stressed sectors of the economy like the NBFCs.