India increased stimulus measures to rescue companies and save jobs in an economy clobbered by a sudden lockdown in March to stem the coronavirus pandemic.
The additional stimulus steps amount to about Rs 9 trillion ($120 billion), taking the nation’s total virus relief to almost Rs 30 trillion , or 15% of gross domestic product, Finance Minister Nirmala Sitharaman told reporters in New Delhi Thursday. That equals the total spending envisaged in the government’s budget for the year to March.
Asia’s third-largest economy slipped into an unprecedented recession after gross domestic product probably declined for a second straight quarter in the three months ended September, according to a Reserve Bank of India report based on high-frequency data. The latest measures are an extension of a rescue plan announced in May, although that’s done little to revive demand in the economy heavily reliant on consumption.
Micro-, small- and medium-sized businesses across 26 sectors will be eligible for a credit-guarantee program, and will get a one-year moratorium on loans and four more years to repay the amount, Sitharaman said.
She counted a production-linked incentive program worth 1.46 trillion rupee ($20 billion) for manufacturing units, already approved by the government, as part of 12 support measures unveiled Thursday. An additional outlay of 180 billion rupees will be made toward an affordable urban housing program, she said.
The virus pandemic further clouds the outlook for the economy. While India’s daily new infections have slowed, the country is the second-worst affected nation after the U.S., with over 8.5 million cases.
The International Monetary Fund sees the South Asian nation now facing the biggest contraction of major emerging markets, with GDP forecast to shrink 10.3% in the year to March -- worse than the 4.5% decline it predicted in June.
Still, high-frequency indicators, including exports, automobile sales and manufacturing output, have shown strength in recent months amid an uptick in consumption. Higher disposable incomes with farmers, thanks to bountiful rains and record crops, have helped boost demand in the hinterland.
“Recovery is happening,” Sitharaman said, pointing to some high-frequency indicators. “It is just not pent up demand.”