HYDERABAD: On Tuesday, Prime Minister Narendra Modi blazed a trail with his Rs 20 lakh crore economic package announcement lifting up the spirits of 1.3 billion people.
Over Rs 12-13 lakh crore worth has already been announced as on Wednesday, leaving as little as Rs 7 lakh crore in unannounced relief. Hopes of whether this will ride to the rescue of sectors standing in line for handouts doesn't really cut the mustard.
Consider the break-up.
Of the Rs 20 lakh crore package, Rs 1.7 lakh crore was rolled out in March. It was subsequently followed up by the RBI's measures worth over Rs 5 lakh crore by conservative estimates. Some have even pegged the central bank's support to be in excess of Rs 7.5-9 lakh crore.
On Wednesday, Finance Minister Nirmala Sitharaman's first batch of relief measures covering MSMEs, discoms and NBFCs-HFCs-MFIs stood squarely at Rs 6 lakh crore. Taken together, a neat Rs 12.7 lakh crore is already in leaving just about Rs 6-7 lakh crore financial firepower in reserve. Whether this will help revive the economy, currently at the death's door, is anybody's guess.
If on Tuesday, Modi's pitched battle for world domination via localisation and long-pending reforms gave hopes of restoring capitalism's lost dynamism, the earmarked sums as part of the big-bang stimulus somewhat lacked the needed killer punch.
The government isn't breaking open its coffers to fund the economic package. Instead, that tab will be picked up by banks and public sector units. This isn't entirely bad economics, but rather a mindful move not to feast on debt and indulge in a reckless spending spree.
One can make the best of a bad phase either through extra spending or foregoing revenue. The government will do the first, albeit in a measured way, and has increased its market borrowing limits last week. But given the scale of the needed stimulus, even the extra Rs 4.2 lakh crore debt won't bring home the bacon for all.
In the absence of a large, direct fiscal stimulus, the industry expects relief in the form of tax cuts even if temporary, but that's unlikely as revenue is already in a terrifying slump.
The only way out is to reform - be it administrative, legislative, or regulatory elements. In fact, Wednesday's move redefining MSMEs with the indifferent attitude towards manufacturing and services nicked to death, besides sending off the age-old investment-guided classification to its resting place gives us a drift of what's to come.
Similarly, the Rs 90,000 crore liquidity support to ailing discoms increases confidence of a revival, but the cure to the ongoing demand-supply slump isn't simply as easy as its diagnosis. Clearly, no amount of stimulus will be enough to overcome the crisis, and the choice for the government is between full reforms and stronger recovery or piecemeal reforms and slower recovery.
ALSO SEE | Professor Prasanna Tantri's analysis of Wednesday's announcements by the FM: