Govt measures unlikely to stimulate demand as package focussed on supply-side: Crisil

Rating agency Crisil on Tuesday joined analysts sceptical about the near-term benefits of the Rs 20 lakh crore stimulus package on growth and also flagged the absence of any dedicated steps for the most troubled sectors.

"...while most steps from government are steps in the right direction, it is unlikely to stimulate demand/consumption given that the package is more focussed on supply-side reforms," its research wing said in a note.

Finance Minister Nirmala Sitharaman on Sunday finished a series of announcements which detailed the stimulus package, but almost all the analysts doubted their efficacy from a growth driving perspective and said that the economy is bound to contract in FY21.

In the note, the analysts at Crisil also voiced some concerns over there being no announcements for highly vulnerable sectors such as airlines, tourism and hotels.

"Further, while the government has not added much to its current year fiscal outgo and thereby deficit it will weigh on public debt next fiscal unless the economy revives," it warned.

With the government making it possible for states to borrow more as a percentage of its finances, and accounting for Rs 1.50 lakh crore or additional headroom created in the package, the states' strategies will now be a key monitorable, the agency said.

The agency also said that the actual fiscal impact of the announcements is far lower than the headline amount of the stimulus because a lot of the measures are through aspects like guarantees.

At Rs 1 lakh crore, the actual fiscal outgo is just 9 per cent of the Rs 11 lakh crore worth of measures announced by Sitharaman, it said.

"Given the fiscal constraints, the government has undertaken measures that can magnify the impact of every rupee of stimulus. Hence the liberal use of guarantees and tiered funding structures," it said.