Stimulus measures before festive season to support growth momentum: Report

Stimulus measures announced by the government before the festive season will support growth momentum as it will provide a push to consumer demand and traction to the unorganized sector, says a report.

According to Dun & Bradstreet's latest Economy Forecast report, capital expenditure as a part of the stimulus measure will help in uplifting growth.

"The signs of recovery are nonetheless fragile as industrial production, bank credit and capital expenditure remain low. The stimulus measures announced by the government before the festive season was thus pertinent," said Arun Singh, Global Chief Economist, Dun & Bradstreet.

The stimulus measures will provide a push to the consumer demand, but importantly it will provide traction to the unorganized sector that would engage in providing services or goods to cater to the festive demand, Singh added.

"The capital expenditure as a part of the stimulus measure will help in uplifting growth. In addition, the RBI's decision to invest in state development bonds for the first time ever might also help in reversing the slowdown in capex as states would get the much-required capital for investment," Singh said.

Finance Minister Nirmala Sitharaman had announced a slew of measures to spur demand and ramp up capital expenditure earlier this month. This was the third stimulus package since the outbreak of the COVID-19 pandemic.

On October 12, Sitharaman announced a payment of cash in lieu of LTC (Leave Travel Concession) and Rs 10,000 festival advance to government employees to stimulate consumer demand during the festival season.

She also announced additional capital spending and a Rs 12,000 crore interest-free 50-year loan to states to boost the economy that has been battered by the pandemic and the resulting lockdown.

As per the report, the pent-up and festival-related demand would provide traction across industrial activity.

The Index of Industrial Production (IIP) is expected to post negative growth during September and rebound to the positive territory from the month of October, the report said.

Dun & Bradstreet expects IIP to have fallen by (-) 5 per cent to (-) 4 per cent during September 2020.