The Indian government has announced a $266 billion assistance package to support its economy which has been hit by the novel coronavirus pandemic.
The headline figure was announced by the Indian Prime Minister Narendra Modi through a national address on Tuesday. The total value of the stimulus package also includes earlier measures that had been taken by the government and the India’s central bank, the Reserve Bank of India (RBI), such as the shore up liquidity by the RBI and the $23 billion stimulus package announced earlier by the government to help the country’s poor.
“This package will work to bring about a self-reliant India,” Modi said. He however did not provide much detail during his speech on Tuesday and the country’s financial minister Nirmala Sitharaman provided more details about the plan on Wednesday.
Until October 31, all small businesses will not require to provide collateral to access funds – for which the government has allocated $40 billion, she said. She added that no foreign company would be allowed to participate in any contracts that have a value of up to $26.5 million as a means to protect local businesses.
The combined fiscal and monetary stimulus package is equivalent to about 10 per cent of the GDP of India, Modi said.
But after accounting for the relief measures that India has already taken, the actual impact could be closer to 4 per cent of GDP, said analysts at Citi. They also believe that there is possibility that some of the expenditure from the package could also spread across more than one fiscal year.
“Given India’s fiscal position, it is difficult to imagine that there is space for 10% of GDP additional spend” this year, they wrote in a research note. But even if though the number could be as low as 4 per cent, it would still be still be much higher than what they had anticipated the Indian government would spend on providing stimulus to the Indian economy to weather the coronavirus storm, the Citi economists said.
According to the estimates of the International Monetary Fund, the Indian economy is expected to grow at 1.9 per cent in the current year.
The Indian government announced an unprecedented three week lockdown throughout the entire country in the third week of March that put its 1.3 billion people inside their homes and all non-essential business to shut doors. Only essential services such as health, grocery and other essential services were allowed to function.
The lockdown has been extended twice since then and is currently in its third phase. Some restrictions were eased during the later part of the current phase of the lockdown with the government allowing limited reopening of construction sites and private offices. The current phase of the lockdown comes to an end on May 17. The future plans on further extension of the lockdown will be announced within this week.
“Scientists say that coronavirus will remain a part of our lives for a long time, but our lives cannot revolve around coronavirus. We will wear masks, maintain social distancing but we will not lose sight of our goals,” Modi said.
(Adapted from CNN.com)