Editorial: Stimulus off the mark

Centre’s relief package may hold promise for the long term but what India needs is urgent measures to revive demand

On the face of it, the latest stimulus package unveiled by Finance Minister Nirmala Sitharaman appears massive, but the devil is in the details. Much of the Rs 6.28-lakh-crore package is in terms of policy reform measures spread over five years, while some more are to do with the procedural changes in the existing schemes. The actual cash benefits for those bearing the brunt of the catastrophic second wave of the Covid-19 pandemic fall much below the expectations. Moreover, the Centre’s offer is largely based on the assumption that banks will step up lending to the vulnerable sectors with government-backed guarantees. Considering the economic situation in totality, the latest tranche of packages does not do enough to remove the uncertainty surrounding the recovery process and boost flagging consumption. The relief measures may hold promise for the long term but what India needs is some short-term, urgent measures to revive the demand. Tax cuts, reduction in petrol/diesel taxes and infrastructure push to create jobs must be considered. The earlier rounds of stimulus have not yielded the desired results. There has been no effort on the part of the government to ensure that the revival packages are properly utilised for reviving the industry and generating employment. As rightly pointed out by the Telangana government, the impact of the much-touted Rs 20-lakh-crore “Atmanirbhar” package has been minimal on the micro, small and medium enterprises (MSMEs), which bore the brunt of the pandemic. The schemes that targeted the MSMEs — for the stressed ones and innovative firms — were complete non-starters. For instance, in Telangana, nearly 80% of the MSMEs faced a negative impact due to the lockdown last year.

There is a need to review the Aatmanirbhar relief package and make it work more realistically for the most affected sectors, including the MSMEs. This is because the ‘one size fits all’ kind of scheme is not the answer to the unique challenges of small enterprises. Direct financial grants would help the small firms that suffered heavy revenue losses in the pandemic. Though the Centre wants the banks to do the heavy lifting, the bank credit in the last one year has grown by just 5.7% and an environment of risk aversion has virtually neutralised the efficacy of monetary measures. Though the monetary policy is accommodative, credit transmission needs to improve to benefit the borrowers. There is a strong case for stepping up expenditure on programmes that support the poorest sections who have suffered the most and on infrastructure projects. Public expenditures must focus on infrastructure, health, food and income support for vulnerable households, and support for small businesses.

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