India: Govt weighs fresh stimuli, relief package to soften Covid-19 blow

• The government has initiated discussions on the need for the next round of relief measures to soften the blow of the Covid-19 pandemic, as the severe second wave and near-Pan India lock-down have led to vigourous calls for more succour to lift economic activities.
• However, given the limited resources and the fact that the government has already rolled out “massive stimulus” in 2020 and announced more steps in the Budget for FY2021-22, any package this time, if approved, could be “smaller”, an official source said.
• But it could still be a “meaningful intervention”, he said. “Preliminary discussions have started,” he added.
• The Prime Minister’s Office and the finance ministry have kept a close eye on the Covid situation as well as on the requirement of further steps to stimulate growth.
• “The government hasn’t closed its door on further relief measures. But the necessity, timing and the nature of any such intervention is yet to be decided,” said another source.
• Sectors like tourism and aviation, and small and medium businesses that have been hit hard are expected to be among the key beneficiaries.
• Currently, the government is closely monitoring the capex programmes, including that of central public sector units, to pump-prime the economy. Other key budgetary provisions, including those on healthcare and infrastructure, are being pursued vigourously too. Spending could be re-prioritised to cater to increased requirement from the healthcare sector in light of the second wave.
• Any further package could again be accompanied with more reform measures to boost the economy, the sources said. From tourism, hospitality to MSMEs, several sectors have sought relief from the government to beat the Covid impact. Even individuals have approached the courts, seeking another loan moratorium.
• In its latest monthly bulletin last week, the Reserve Bank of India (RBI) said the biggest toll of the current second wave is in terms of a demand shock (loss of mobility, discretionary spending and employment, besides inventory accumulation), although aggregate supply is less impacted. The RBI had in Apr 21 (before the full fury of the Covid resurgence) pegged the FY2021-22 growth rate at 10.5%.
• Meanwhile, Nobel Laureate Abhijit Banerjee believes that the Indian government needs to raise pandemic support spending.
• He claims that it is possible to spend an extra 2% of GDP as many countries have borrowed 10 times more than India.
• He added that he does not see any reason why bond markets should react negatively to such moves made to avert an ongoing series of crises.

External Link : https://www.financialexpress.com/economy/growth-pangs-govt-weighs-fresh-stimuli-relief-to-soften-covid-19-blow/2258903/

External Link : https://economictimes.indiatimes.com/news/economy/policy/nobel-laureate-abhijit-banerjee-calls-on-modi-govt-to-raise-pandemic-support-spending/articleshow/82966992.cms