The massive economic package announced by Prime Minister Narendra Modi amounting to Rs 20 lakh crore which is 67 per cent of the government of India’s Rs 30.42 lakh crore which was the projected spending for FY21. It is highly likely that it will spread until FY22 or longer.
Of the 4 ‘L’s that were mentioned, land, labour and law are aimed towards a longer-term approach, where its impact will reflect over a longer period of time. The fourth, liquidity will have a direct impact on the economy’s revival, the Reserve Bank of India (RBI) has already taken important steps of adding up to Rs 4.73 lakh crore (which is about 2.4 per cent of the GDP).
Consumption is the one factor that can revive the economy rapidly. Lack of demand right now is what hurts the economy the most right now. Hence it is of paramount of importance to revive demand as soon as possible. Some of the things expected are:
Infrastructure spending
One of the major pillars of a good economy is its infrastructure. Infrastructure is what links the entire economy together. Increasing investment in healthcare and other infrastructure, speeding up execution of existing infrastructure projects identified by NIIF, and also enabling
them to raise private and foreign capital is necessary.
Tax and GST cuts
Tax cuts could ignite a major boost to demand. So far only corporate tax cuts were seen while most other taxes saw a spike. If the Centre reduced other taxes, it would entice some of the biggest boosts to consumer confidence to spend more.
More emphasis on Real Estate
Real estate drives consumption as well as borrowings. Thus, any concessions to them, like GST rebates, rebates on stamp duty etc. could help raise demand in the real estate sector.
More Direct Benefit Transfer
DBT is aimed at the poorest of the poor which is usually meant for subsistence spending instead of pumping demand. But the more DBT is increased, it will lead to an increase in consumption.
There are over 135 million informal workers and contractors that expect payroll support during this lockdown period. Better payroll support will help drive consumption.
MSMEs
MSMEs is what drives a major part of the Indian economy. Besides payroll support, a Credit guarantee fund with 75:25 risk sharing, more liquidity from RBI to banks and other institutions up to Rs 1.2 lakh crore, loans to first-time MSME borrowers of Rs 1 lakh crore with 75:25 risk that’s shared between the Centre and banks.
