Nearly three months after the roll out of the Rs 21 lakh crore Atmanirbhar economic stimulus package, details of its transmission are delightful, only partly.
That’s because, several big-ticket items remain unboxed. If the Rs 1 lakh crore agricultural infrastructure fund just got its shape, others like the Rs 50,000 crore Fund of Funds for MSMEs or the Rs 50,000 crore coal evacuation infrastructure await their turn.
Little progress is visible on Tranche-3 announcements aggregating Rs 50,000 crore towards animal husbandry or formalisation of micro food enterprises, while the Rs 70,000 crore credit-linked housing subsidy entails little government spend.
Incidentally, these were all part of FY21 budget with expenditure spanning 3-4 years. Thus, hopes of an anticipated Stimulus-II prompts us to place it both as a proxy and a precondition for economic revival.
That said, economists TNIE spoke to confirmed that much of the fiscal component including cash and in-kind transfers has been dutifully spent. Some credit measures too are on fast-track with banks sanctioning about half of the Rs 3 lakh crore credit guarantee for MSMEs and Rs 2 lakh crore concessional credit to farmers.
“Since several schemes have monthly, one-off, and liquidity measures, it’s difficult to quantify right away. But if one were to do that, much support has been done, given the food, MGNREGA and credit lines are already in motion,” said Rahul Bajoria, Chief Economist, Barclays India.
He added the government still has room for Rs 40,000-50,000 crore to spend, which could come around the festive season. Several sectors need policy support, but Bajoria believes funds should be channelled to revive discretionary spending as they tend to have a multiplier effect.
That throws up two questions: How much should be spent and where? Madan Sabnavis, Chief Economist, Care Ratings believes at least 2% of GDP or Rs 4 lakh crore should be plonked down right away. “Until now, focus was more on credit channel, which works to the extent that companies require funding.
But we need to create jobs which cannot happen in the present environment,” he explained. Per World Bank, half of the 621 measures announced by 173 countries were cash-based with the rest comprising food assistance (23%) and loan moratorium/waivers (25%). Government spending on public works was pea-sized at 2%. Perhaps, the government’s response so far was in line with peers, but can such measured spending yield the kind of growth recovery we aspire?
While the debate whether fiscal expenditure or credit support aids consumer demand better than the other remains unsettled, Sujan Hajra, chief economist, Anand Rathi Securities concludes that given the fiscal constraints, sectoral reliefs could be a good place to begin.