Coronavirus: Stimulus 2.0 in mind, Modi and Sitharaman hold talks
With economic activity coming to a standstill for almost a month due to the coronavirus pandemic, Finance Minister Nirmala Sitharaman on Thursday met Prime Minister Narendra Modi to discuss a package that could keep the wheels churning. On March 26, she had announced a financial aid of Rs. 1.7 lakh crore for the most vulnerable sections. Now, businesses want something similar.
Almost all sectors are facing the brunt due to lockdown
Talks about a package being released have been going on for quite some time now, but an exact date of announcement is unknown. Earlier, industry bodies, while welcoming the extension of lockdown till May 3, said a package of Rs. 14 to 16 lakh crore should be announced as most of the companies are shut and almost all sectors are staring at oblivion.
Package's amount could be between 2-4% of India's GDP
Two persons, familiar with the matter told HT the package aims to provide relief to the farm sector, micro, small and medium enterprises (MSMEs) as well as large businesses. Whereas a third person said the aid could be somewhere between 2% and 4% of the GDP, which will come around Rs. 5 to Rs. 7.5 lakh crore. The stimulus is almost ready.
Big bang announcement unlikely, government to make targeted ones
Sitharaman had several rounds of meetings with various ministries. The measures could be based on their inputs as well as the findings of a task force, set up by PM Modi, reports ET. Sectors like hospitality, tourism, aviation, exports (including textiles, gems, and jewelry) could be given some respite. Rather than a big announcement, the Centre could focus on smaller ones, Business Standard said.
Government will focus on step-by-step approach
"Our approach is not one grand plan but repeated responses. Unlike other countries, there will be no single package worth 5 or 10 percent of GDP, but rather a step-by-step approach," an official told Business Standard. To give a perspective, the US announced a package worth 11% of its GDP. Australia's package made for 9.7% and Brazil's 3.5% of their respective GDPs.
The lockdown will cost economy $137 billion, believe experts
Niranjan Hiranandani, President of Associated Chambers of Commerce and Industry, said the government must clear dues and also cut GST temporarily to boost demand. Experts believe the lockdown will cost the economy a massive $137 billion. Even when the restrictions are lifted, things will not magically go back to normal, considering the supply chain is broken. The Centre is looking at clearing dues.
RBI could also cut basis points to infuse liquidity
There are also some expectations from RBI. A day after Sitharaman announced the package to put money in pockets of underprivileged, RBI cut basis points. And HT said the apex bank could reduce basis points by 100 to infuse liquidity. "There is a demand for further easing of monetary policy from stakeholders. Inflationary pressure is also lower," one person told HT.
Reportedly, the government is focusing on daily wage workers
The first priority is to help daily wage workers, and the government hopes that the little economic activity that has been allowed after April 20 will serve this purpose. "But, farmers will require faster procurement and small industries that employ workers in large numbers would require financial support to restart their business. A fund can be created to support them," the person added.
