Centre’s latest stimulus not enough

Across the Bay of Bengal, Singapore spent nearly 20% of its GDP as fiscal stimulus.

Published: 17th October 2020 06:34 AM  |   Last Updated: 17th October 2020 06:34 AM   |  A+A-

Union Finance Minister Nirmala Sitharaman (Photo | Shekhar Yadav/EPS)

Union Finance Minister Nirmala Sitharaman (Photo | Shekhar Yadav/EPS)

Earlier this week, the Centre came up with its latest package of stimulus measures, which, despite the fanfare accompanying the announcement, seemed to be one of the most underwhelming rescues yet announced for the Indian economy that shrank by nearly 24% in the first quarter of this fiscal.

The package of measures amounting to Rs 46,700 crore or about 0.2% of the GDP, sold as a booster dose to pep up demand, is now being seen as a case of being too little to resuscitate an economy that was slowing down even before the pandemic hit Indian shores and is now forecast to shrink by over 10% this financial year. 

In all, the direct spending on fiscal stimulus announced by the Centre since the pandemic began is estimated at between 1.2% (by Moody’s) and 2% (by the IMF), and is considerably less compared to the money spent by peer economies.

Across the Bay of Bengal, Singapore spent nearly 20% of its GDP as fiscal stimulus. Further away, the US, the epitome of capitalism, spent money on various measures including wage-roll support for small firms and direct cash transfers to its people, which amounted to 13.3% of its GDP. 

Despite a clamour from both businesses and economists to spend more on schemes to generate jobs and on infrastructure that could have a huge impact on demand, India’s direct spending has remained muted, possibly because the Union government is struggling to make both ends meet.

While fiscal prudence is indeed good, being virtuous at the cost of livelihoods and what used to be one of the strongest economies in Asia, may not be exactly prudent. Rather, loosening the purse belt even at the cost of borrowing more to support jobs schemes and small firms that employ most Indians, may be a calculated risk that India should consider. Injection of money into the system by way of wages and infrastructure spending would help create the virtuous cycle that the country needs: of demand feeding expansion of factories which in turn could create more jobs and more demand. 


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  • vilas Latthe

    time to time the d.a. if announced it is possible to have more trasactions of money flow by govt employees, i feel. thanks.
    8 days ago reply
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