India Plans Stimulus Package to Support Economic Growth

  • India is preparing a stimulus package for sectors worst affected by a deadly coronavirus wave, aiming to support an economy struggling with a slew of localized lockdowns, people familiar with the matter said.
  • The finance ministry is working on proposals to bolster the tourism, aviation and hospitality industries, along with small and medium-sized companies, the people said, asking not to be identified as the deliberations are private. The discussions are at an early stage and no timeline for an announcement has been decided, they said.
  • The latest wave of Covid-19 infections has decimated travel since the second wave picked up in Mar 21 even though Prime Minister Narendra Modi has refused to implement a strict nationwide lockdown. With nearly 200,000 daily cases daily many local governments, including India’s most industrialized states — have imposed curbs against the spread of the virus.
  • Finance Minister Nirmala Sitharaman, who said in Apr 21 that she’s monitoring the economy in a “very detailed fashion,” has held discussions with economists in recent days about a stimulus package, the people said.
  • The proposals are being drawn up at time when the rupee has emerged as Asia’s top-performing currency from its worst on signs that India’s virus crisis may be easing. India’s stock benchmark is also approaching a record-high close reached in Feb 21.
  • In Apr 21, the finance ministry eased rules for capital expenditure by government departments to try to boost spending in the economy. It also decided to allocate five kilograms of free food to the poor per month as the lockdowns saw millions of migrant laborers flee urban areas and back to their rural homes.
  • But Sitharaman’s hands are restrained given India aims to lower its budget gap to 6.8% of gross domestic product in the financial year to Mar 22, from an estimated 9.5% in 2020, signaling little legroom for New Delhi to ease purse strings in a significant manner.
  • Pressure also is building on the central bank — which serves as the banking sector regulator — to ease loan repayment rules, especially for sectors badly hit by this virus wave.

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