Second stimulus equal to one per cent of GDP needed: Bankers

People from the banking industry said that a second economic stimulus package, as indicated by the finance minister Nirmala Sitharaman and other senior finance ministry officials, is indeed required but it should be a proper stimulus package of at least one per cent of the GDP.

New Delhi: A second economic stimulus package as indicated by the finance minister Nirmala Sitharaman and other senior finance ministry officials is indeed required but it should be a proper stimulus package of at least one per cent of the GDP, said people from the banking industry, adding that the recent consumption boosting measures announced by the finance minister was not adequate.

Early this month, finance minister Nirmala Sitharaman announced several measures to boost consumption ahead of the festive season. These schemes included cash vouchers instead of LTC and a prepaid credit card for government employees so that they can spend money during the festive season, which will help in boosting the demand.

“We were anyway expecting that there will be a stimulus around the festive season but what has come about right now is probably not adequate enough,” said a senior banker with a top private sector bank.

“As of now only Rs 50,000-60,000 crore have been announced and that too it is not like a direct stimulus coming, it depends on government employees spending, they spend the money and they return it as EMI when they can. So these are functions of whether an individual wants to spend or not to spend, it's not a direct stimulus,” the banker told ETV Bharat while requesting not to be named.

Talking about the need for another stimulus package, the banker told ETV Bharat that there is a need to give a stimulus of at least one per cent of GDP.

“I think there is a need for another stimulus for sure, we also heard from the finance minister that they are open to another round. We are hoping for a proper stimulus package,” said the banker.

Addressing a programme organised by the industry body CII, economic affairs secretary Tarun Bajaj also hinted at the possibility of another round of stimulus which is in the making.

“The govt has received suggestions from various ministries and sectors on needed measures,” Bajaj told the audience in a financial market summit organised by the CII last week.

A senior economist working with a bank told ETV Bharat that the value of the second stimulus package should be one per cent of the country’s GDP to have a positive impact on the economy.

“We are looking at something like one lakh crore or over one lakh crore, or something close to one per cent of GDP, which will be around Rs 1.7 lakh crore to Rs 1.8 lakh crore,” the economist told ETV Bharat.

Atma Nirbhar Bharat Package

In May this year, Prime Minister Narendra Modi announced a Rs 20 lakh crore stimulus package to support the already slowing economy which was expected to be further hit by the outbreak of Covid-19 global pandemic.

The figure announced by the government pegged the value of stimulus close to 10% of the country’s GDP but it was criticised by the opposition parties and economists as it entailed several existing schemes already announced in this year’s budget.

It was also criticised as most of the schemes were aimed at providing easy credit to businesses facing cash crunch on account of Covid-19 and the real fiscal cost was estimated at around Rs 2-2.5 lakh crore only.

(Article by Krishnanand Tripathi)