The government’s Rs 6.3 lakh crore economic relief package is designed to save the nation from further economic ruin and fetch robust growth recovery. Policy-watchers say the timing may be right, but they believe the government is making haste slowly. Though the package rightly taps four key sectors, namely healthcare, agriculture, tourism and micro finance, it’s unclear if these supply-side measures alone can trigger the needed demand boost. The human misery that unfolded recently due to the second wave of Covid-19 has shifted healthcare expenditure as a routine policy option to an economic necessity. So, Finance Minister Nirmala Sitharaman finally budged, pledging Rs 50,000 crore worth credit guarantee to the sector at lower interest rates. And to match and influence the private sector’s capacity creation, she vowed to spend an additional Rs 23,000 crore to enhance medical infrastructure with a specific focus on paediatric care. This is a welcome step, although critics whisper the actual figure should be much more.
Agriculture, which cushioned the shock for Covid-19, got a leg up by way of better seeds and fertiliser subsidies. These efforts, the Centre hopes, will help increase crop productivity and hence farmers’ income. The relief measures comprising credit support to tourism and other sectors complement the RBI’s earlier decision to open a special window for contact-intensive sectors. But credit guarantees do not tantamount to fiscal outlays and the Centre will cut a cheque only when the guarantees are revoked. It means, the headline impact for the government is little and so the fiscal deficit slippage could be minimal.
Interestingly, Monday’s announcements briefly touched upon a new process for PPP projects and asset monetisation. Though Sitharaman didn’t elaborate, it reflects the intent towards aggressive revenue-raising efforts. The Centre also got lucky with the RBI transferring an unexpected dividend last month. Besides, direct tax collections in Q1 jumped 66%, while GST collections crossing the Rs 1 lakh crore mark for eight months in a row indicates better-thanexpected revenue. This, along with expenditure rationalisation, should leave enough room to spend more on the key missing piece of boosting direct consumption.