New Delhi: The Rs 20 trillion economic package announced by Prime Minister Narendra Modi
on Tuesday includes the March allocation as well as liquidity measures announced by the central bank worth $6.5 trillion rupees.
This means the effective new package announced would amount to Rs 13.5 trillion.
The package would be in the form of fiscal and monetary measures to bolster the economy battered by the nationwide lockdown due to the COVID-19 outbreak, but the details would have to be scoured to gauge its effectiveness.
So far, India has reported more than 70,000 cases and the tally is set to set to surpass China, the origin of the outbreak, within a week, Reuters reported.
Modi said strict stay-at-home orders would be extended beyond May 17 with a new set of rules.
The economic package announced by the PM was equivalent to 10 per cent of India's gross domestic product and aims to boost and accelerate resumption of economic activity.
The centre provided Rs 1.7 trillion rupees ($2.6 billion) in direct cash transfers and food security measures in March.
"The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, medium and small enterprises, labourers, middle class, industries, among others," Modi said in his address to the nation.
Details of the new package, as well as reforms of land and labour markets, would be released within days.
"Headline announcement looks positive. Would include around 6.5 trillion rupees already done by RBI (Reserve Bank of India) and the first package. So - additional is 13.5 trillion rupees," said Sandip Sabharwal, a Mumbai-based fund manager.
"It doesn't match the gross borrowing details of the government so we need to look at details. Headline number should, however, excite the markets near-term."
India had announced an increase in its borrowing programme for the year to Rs 12 trillion from Rs 7.8 trillion to fund its increasing expenses.
Some commentators said it was too early to say how effective the package would prove to be.
"Very often, when the government has made these huge, very big announcements ... the figures have often been fudged," Yogendra Yadav, founder of the opposition party Swaraj India, told a television channel.
"What we have right now is a statement of intent. How can you quarrel with intent?"
Business leaders say potential investors often choose Vietnam, Thailand or Bangladesh ahead of India because of the time required to buy land for factories, restrictive labour laws and higher borrowing costs.
"India’s response has so far been tepid compared to other key nations and thus the catch-up is welcome and is also the need of the hour," said Madhavi Arora, lead economist at Edelweiss FX and Rates.
"It needs to be seen how much will be in the form of direct budgetary support to gauge the immediate fiscal hit and the consequent funding sources."
"These reforms will promote business, attract investment, and further strengthen 'Made in India'," Modi said.
Economic woes
Economic growth was already declining and public finances were stretched due to poor tax collection and higher spending.
Ratings agency Fitch said in April India's sovereign rating could come under pressure if its fiscal outlook deteriorates further as the government tries to tackle the coronavirus crisis.
Governments and central banks around the world have unleashed unprecedented amounts of fiscal and monetary support for economies that are reeling from the pandemic.
(With Reuters inputs)
