Cost of economic stimulus just 1% of GDP, not 10%: Economists

The fifth and last tranche of the Centre’s Rs 20 lakh-crore stimulus to soften the COVID-19 blow mostly dealt with the economic reforms and left businesses seeking more to address their immediate woes. And those championing the cause of the underprivileged said cash in hand was the only way to tide over lockdown-related stress.

Economists calculating the cost of the stimulus said the additional cash outgo of the entire package was only about Rs 2 lakh crore or less than 1% of India’s Rs 211 lakh crore GDP. The Rs 8 lakh crore worth of steps unveiled by RBI will have no fiscal impact.

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Barring Rs 40,000 crore to help migrant workers going back to their homes find jobs under MNREGS, Finance Minister Nirmala Sitharaman’s last set of announcements was confined to reforms and ease of doing business.

She said private players will now be allowed to enter India’s strategic sectors. In all other sectors, public sector enterprises will be privatised. It could unlock a lot of value but there is no definite timeline for the policy shift.

The violations of Companies Act involving minor technical and procedural defaults will be decriminalised and COVID-related debt will exempted from default.

But India’s seven-crore strong retail trade, mostly consisting of mom-and-pop stores, said, nearly 20% of them will be forced to shutter and the remaining will be thrown into a deep financial crisis, if direct cash transfers were not made.

Hospitality, including trade and hotels, said they were “shocked and devastated” to find nothing from them. Ficci demanded another package for them.

An SBI research said only Rs 1.37 lakh crore was the direct cash outgo from the first four stimulus tranches of Rs 11.43 lakh crore, while the rest was only re-allocation of resources. Add Rs 40,000 crore of MGNREGS of the last tranche, it would be Rs 1.77 lakh crore.

A Care Rating research, however, said, the total fiscal impact of stimulus could be a little over Rs 2.50 lakh crore, if the Rs 50,000 crore to be spent on coal evacuation, which is staggered, is also taken into consideration. It said immediate cash outgo would only be up to Rs 80,000 crore.