What is the total additional fiscal cost that the government is likely to incur due to the relief measures announced on Monday?
The initial estimates seem to vary from Rs 60,000 crore to 1.2 lakh crore as economists and other experts try to figure out the fiscal impact of the announcements.
Even as the government touted a figure of Rs 6.29 lakh crore -- the size of the relief package announced by it -- most of it is in the form of credit guarantee and capital infusion in certain areas over five years. The immediate fiscal cost of a credit guarantee will be difficult to ascertain. Also, some of the allocations, which are part of the Rs 6.29 lakh crore relief measures, had already been announced earlier.
The direct cost incurred by the government in the current financial year is through the extension of free food scheme from May to November, and the new scheme for public health and additional fertilizer subsidy, among others.
Dr DK Srivastava, Chief Policy Advisor, EY India, says, "The direct stimulus is limited to three main initiatives -- extension of the distribution of free food grains under PMGKY with an estimated cost of Rs 93,869 crore, additional health sector expenditure amounting to Rs 23,220 crore of which Centre's share would be Rs 15,000 crore, and Rs 19,041 crore for improving rural connectivity through expanding BharatNet over 2 years starting 2021-22 has been envisaged."
"The total additional burden on the 2021-22 budget from these three initiatives would be Rs 1,18,390 crore. This amounts to about 0.5% of estimated GDP for 2021-22," he notes.
However, others estimate the direct fiscal cost to be much lower.
"Setting aside the guarantee schemes and the announcements that had already been made prior to today, the step up in the fiscal outgo within 2021-22 based on the fresh announcements is estimated at around Rs 60,000 crore," says Aditi Nayar, chief economist, ICRA.
She says that free foodgrains and enhanced fertiliser subsidy, which had already been announced with an aggregate cost of around Rs 1.1 trillion, will largely get financed by the prepayment of the FCI's loan in FY2021.
According to her, the new schemes announced for the pandemic-affected sectors include the extension of guarantees of around Rs. 2.6 lakh crore, which will have a limited fiscal cost upfront, even as their success will hinge on offtake.
Schemes worth Rs. 2.4 lakh crore are spread over the next two to four years. However, some of these had already been announced at the time of the Budget, and therefore, a portion of their cost has already been factored in.
Sreejit Balasubramanian, India economist at IDFC Mutual Fund, says the immediate fiscal expenditure from today's measures is 0.77% of GDP, of which 0.56% is from measures already announced. So, according to him, the government will have to plough in Rs 41,500 crore or 0.21% of GDP as additional amount in the current year.
Another economist from a prominent corporate house said on the condition of anonymity that while the immediate impact may not be much, a lot of the proclaimed new small-ticket loans would be NPAs triggering guarantees from govt, which he believes would be at least 30% of the 2.6 lakh crore sanctioned under the Emergency Credit Line Guarantee Scheme.