A stimulus of Rs 1,86,650 cr amounting to barely 0.91% of GDP will be totally inadequate given the gravity of the economic crisis: Chidambaram
Former finance minister P Chidambaram on Monday said: “We express our thorough disappointment and request the government to reconsider the Stimulus Package and announce a Revised and Comprehensive Fiscal Stimulus Package of not less than Rs 10 lakh crore of real Additional Expenditure equivalents to 10 per cent of GDP.”
Following the Prime Ministerās announcement of a Rs 20-lakh crore Stimulus Package on May 12, the Finance Minister filled in the details over a period of five days.
“In our considered opinion, only the following items qualify as Fiscal Stimulus Measures entailing Additional Expenditure over and above the amount of Rs 30,42,230 crore in the Expenditure Budget for 2020-21,” P Chidambaram said.
He listed the items:-
1. Revenue lost due to tax concessions since 22-03-2020: Rs 7,500 crore
2. Pradhan Mantri Garib Kalyan Package
Cash transfers Rs 33,000 crore
Free grain Rs 60,000 crore
3. Medical and Health Infrastructure Rs 15,000 crore
4. EPF support for Businesses and Workers Rs 2,800 crore
5. Reduction of EPF rates Rs 6,750 crore
6. Free food grain for migrant workers for 2 months Rs 3,500 crore
7. Interest subsidy for MUDRA Shishu loans (assuming the entire subsidy will be paid to the banks in 2020-21) Rs 1,500 crore
8. Additional credit through KCC (assuming the additional interest subsidy will be paid to the lenders in 2020-21) Rs 8,000 crore
9. TOP to TOTAL Operation Greens Rs 500 crore
10. Promotion of Herbal Cultivation for 2 years Rs 4,000 * crore
11. Viability Gap Funding (assuming the entire amount will be paid in 2020-21) 8,100 crore
12. Additional allocation for MGNREGS Rs 40,000 crore
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This totals to 1,86,650 crore.
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“The rest of the announcements included already budget expenditure, front-loading of some budgeted expenditure, regulatory measures, a number of liquidity measures, medium to long term plans/schemes, and proposed reforms. We will comment on these in due course.” Former FM said
“Let me state categorically: there can be no fiscal stimulus to the economy without Additional Expenditure over and above the Budgeted Expenditure,” Chidambaram said
Congress leader said that the Finance Minister has acknowledged that Additional Expenditure must be financed by Additional Borrowing.
“The true value of the fiscal stimulus package will, therefore, be known when we know what is the Additional Borrowing in 2020-21 to finance the Additional Expenditure over and above the Expenditure Budget of Rs 30,42,230 crore. The truth cannot be hidden for long.”
“In our view, a fiscal stimulus of Rs 1,86,650 crore amounting to barely 0.91% of GDP will be totally inadequate given the gravity of the economic crisis and the dire situation in which people find themselves. Most analysts, rating agencies and banks have placed the size of the fiscal stimulus at between 0.8 to 1.5%.”
The fiscal stimulus package has left several segments without much help including (1) the bottom half of the population (13 crore families); (2) migrant workers; (3) farmers; (4) landless agricultural workers; (5) daily wage non-agricultural workers; (6) workers who have been laid off or retrenched; (7) workers in unorganized or unregistered businesses/units who have lost their jobs; (8) self-employed who have no work; (9) 7 crore shopkeepers; (10) lower-middle-class families who have run out of cash and are forced to borrow; and (11) 5.8 crore MSMEs.”
FM Nirmala Sitharaman in 5 days released details of the Rs 20 lakh crore economic package announced by PM.
The mega stimulus package of Rs 20 Lakh Crore is being released by the Central government to help restore the economy hit by the pandemic.
The announcement has already soared the markets, with the benchmark equity market indices on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) opening nearly 4% higher.
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