PM Modi’s package will revive economic activity but more clarity is needed, say economists

“It's a very welcome step, despite a lot of hesitation finally the government of India has yielded to the popular demands from the economists, markets and other stakeholders,” said NR Bhanumurthy, Professor of Economics at the National Institute for Public Finance and Policy.

New Delhi: Economists and Industry have welcomed Prime Minister Narendra Modi’s announcement of Rs 20 lakh crore economic package today, saying that it will revive the economic activity in the country. However, two top economists have sought more clarity over the contours of the package as it will subsume several measures already announced by the Reserve Bank of India and finance minister Nirmala Sitharaman.

“It's a very welcome step, despite a lot of hesitation finally the government of India has yielded to the popular demands from the economists, markets and other stakeholders,” said NR Bhanumurthy, Professor of Economics at the National Institute for Public Finance and Policy.

“There was certainly a need for it. It will revive the economic activity in the country,” Professor Bhanumurthy told ETV Bharat.

In his fifth address to the nation since the outbreak of Covid-19 pandemic, Prime Minister Narendra Modi said the country will have to attain self-reliance by completely revamping the economy, agriculture, infrastructure, and also the means of transportation in the country.

The Prime Minister said the economic package will also include the earlier measures announced by the government and the RBI, taking the size of the total package to Rs 20 lakh crore or 10% of the GDP.

Bhanumurthy said the large stimulus measure should substantially increase the economic activity in the country.

In his televised address, Prime Minister Modi gave a clarion call for a self-reliant India while outlining his broad vision. He said the Covid-19 crisis was also an opportunity for the country to emerge as a world leader in the twenty-first century.

He, however, did not provide the break-up of the stimulus package or his roadmap for arranging the money to fund this massive package of Rs 20 lakh crore, which is equal to total budgeted revenue receipts of the government in the current fiscal and one third of the total budgeted expenditure of the Union government this year.

Exact quantum of news measures difficult to calculate

Economists like Sunil Sinha of India Ratings seek more details about the stimulus package as it will also subsume existing measures already announced by the RBI and the government.

“We appreciate the government's intent, concern and various announcements. But if it is done in much more coordinated and coherent manner about the exact quantum of the package then it will be better,” he told ETV Bharat.

He highlights that even in case of Rs 1.7 lakh crore PM Garib Kalyan Package, which was announced by finance minister Nirmala Sitharaman in March, the package included several existing allocations from the budget.

“If you look at the PM Garib Kalyan scheme, then the fresh allocation adds up to Rs 70-80,000 crore and the rest was already budgeted for,” Sunil Sinha noted.

He said there was overlapping and confusion in the packages announced by the government.

Several other advanced economies like the USA, UK, and Germany announced their stimulus package in the initial phase of the outbreak of Covid-19 global pandemic.

While the US Federal Reserve announced a $2.3 trillion lending programme, Germany announced a package of over $800 billion and the UK government announced a package of £330 billion.

Economists also point out the difficulty in computing the exact quantum of the package as a percent of the GDP as the Prime Minister’s package will include several existing packages, and it is also not yet clear how the package will be funded.

“It is not yet clear what will be the exact quantum of the package as a percent of the GDP. It is unlike many other countries where things are far more clearer,” Sunil Sinha told ETV Bharat.

(Article by Krishnanand Tripathi)