Relief package inadequate, extra stimulus must for stressed biz: Economists

The Rs 1.7-trillion coronavirus lockdown relief package announced by Finance Minister Nirmala Sitharaman is inadequate, say  some prominent economists.

They feel an additional stimulus package is required for stressed sectors with the country's economic growth estimated to touch new lows in 2020-21. These sectors — hotels, trade, banks and aviation, among others — need a relief package on a priority basis to overcome the brewing economic and job crisis in the country, say the critics.

Former RBI governor  C Rangarajan said sectors such as hospitality, restaurants and travel have been particularly affected and need support at this time. Besides, the relief package for the poor and vulnerable, announced on Tuesday, might not suffice for those thrown out of employment in the wake of the COVID-19- induced lockdown.

“Problems faced by the business sector haven’t been addressed, which I feel will probably be addressed later by the government,” said Rangarajan. Besides, those not having a bank account might get missed out, with the government talking of direct transfer of benefits into such accounts. “Although the government opened Jan Dhan accounts, they should make it clear as to how many migrant labourers have accounts and how many do not. That part needs to be addressed.”

Rangarajan adds that if the disruption due to coronavirus lasted  more than two months, it will affect the economy severely.

State Bank of India chief economist Saumya Kanti Ghosh says the the government will need to shell out at least an additional Rs 3.55 trillion. And, the Reserve Bank of India (RBI) should provide relief of Rs 1.35 trillion to banks.

“The package should include at least Rs 1 trillion for postponement of taxes and bailout for specific sectors, Rs 75,000 crore compensation from the Centre for Goods and Services Tax shortfall,  Rs 75,000 crore capital requirement… and a Rs 50,000 crore forbearance package for the stressed sectors,” said Ghosh.

He has estimated a 1.7 percentage points impact on real gross domestic product in FY21. With at least 70 per cent of the economy at a standstill, SBI has estimated the FY21 GDP growth at no more than 2.6 per cent, with the first quarter seeing a contraction. In fact, the GDP growth for 2019-20 could see a downward revision to 4.5 per cent, from the 5 per cent estimated by the national statistical office, it added.

The Confederation of Indian Industry had sought a  Rs 2 trillion package for the poor and that the central bank announce a blanket moratorium on debt repayment for 60 days, to help firms tide over immediate cash flow issues.

The American legislature has passed a $2.2-trillion economic rescue package for aid businesses, workers and health care systems affected due to the pandemic.

“The package is very limited. Even for the most vulnerable, Rs 500 is too small an amount. The amounts need to be ramped up,” said Madan Sabnavis, chief economist at CARE Ratings. He adds that implementation will be key, with the possibility of leakages.

Gokul Chaudhri, partner at consultants Deloitte India, said: “Addressing the concerns of other stakeholders in society, such as those impacted in tourism, aviation and the hospitality sector, is awaited. Efficient implementation is now key for the announced measures.”