On May 12, 2020, the PM announced 20 Lakh cr economic package, after which, for the next five days, our FM explained it bit by bit. First of all, there are two kinds of economic packages: monetary (which is done by RBI), and second one is fiscal which is done by the Government.
According to HSBC India, the amount will be 1% of the GDP, which is 2 lakh cr., and Care ratings has estimated it to be around 2.73 lakh cr.
In the end, there is nothing wrong in providing loans/cheap interest loans, but this pandemic and the resultant lockdown has led to job losses, revenue losses and even lack of stable income. This makes it difficult for affected people to take loans and pay them back. Add to it more problems from weak demand much before COVID-19 was introduced to the equation… Let’s hope there is no big NPA ghost waiting for us.
Nobel laureate Abhijit Banerjee has said, Modi government should look at providing cash transfer to the bottom 60% of India’s population to help revive the economy. “We haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. United States has gone for 10% of GDP,” he pointed out.
Abhijit Banerjee also flagged the need to completely cancel debt payments by borrowers for the entire quarter rather than just rescheduling it in a bid to protect firms against bankruptcies. In March, the RBI had announced a three-month loan moratorium on all term loans, providing a reprieve to the borrowers.
All in all, when the demand is there and people are equipped with disposable income, the economy’s wheel will start rotating and demand will check the supply side surely.