Additional is Rs 13.5 Lakh Crore

Prime Minister Narendra Modi said Tuesday that the country would provide Rs 20 lakh crore ($ 266 billion) in fiscal and monetary measures to support an economy hit by a week-long lockdown to combat the new coronavirus. India has more than 70,000 cases among its 1.3 billion population and is expected to overtake China, the source of the outbreak, within a week.

Prime Minister Modi said the strict orders to stay home would be extended beyond May 17 with a new set of rules.

In a speech to the nation, he said the package was equivalent to 10 percent of the country’s gross domestic product, and was aimed at jobless crowds and businesses reeling under the prolonged shutdown.

In March, the government said it was providing around Rs 1.7 lakh crore ($ 22.6 billion) in cash transfers and food security measures, primarily for the poor, but was widely accused of doing too little.

Prime Minister Modi said details of the new package, as well as reforms of the land and labor markets, will be released in a few days: “The package will also focus on land, work, liquidity and laws “

It will cover various sections, including the artisan industry, medium and small companies, workers, the middle class, industries, among others.

Economists said the new package included the March allocation as well as the liquidity measures announced by the central bank worth Rs 6.5 lakh crore.

“The main announcement looks positive … It would include around Rs 6.5 lakh crore already made by RBI (Reserve Bank of India) and the first package. So additional is Rs 13.5 lakh crore,” said Sandip Sabharwal, a fund manager with based in Mumbai. .

“It doesn’t match the details of gross government loans, so we need to look at the details. However, the headline number should excite markets in the short term.”

Last week, the government increased its loan program for the year to Rs 12 lakh crore from Rs 7.8 lakh crore to finance some of the expenses.

Slowdown in the economy, increased spending

Even before the pandemic, growth in the economy slowed and public finances tightened due to poor tax collection and increased spending.

Last month, the ratings agency Fitch said India’s sovereign rating could be under pressure if its fiscal outlook deteriorates further as the government tries to tackle the coronavirus crisis.

Some commenters said it was too early to say how effective the package would be.

“Very often, when the government has made these huge, very large announcements … the figures have often been falsified,” Yogendra Yadav, founder of the opposition party Swaraj India, told a television channel.

“What we have now is a statement of intent. How can you fight intention?”

Prime Minister Modi said the reforms in the land and labor markets were intended to make the country more competitive and a major player in global supply chains, some of which could drift away from China after the pandemic.

Business leaders say potential investors often choose Vietnam, Thailand, or Bangladesh over India because of the time required to buy factory land, restrictive labor laws, and higher borrowing costs.

“These reforms will promote business, attract investment and further strengthen the ‘Made in India’,” Prime Minister Modi said.

Governments and central banks around the world have unleashed an unprecedented amount of fiscal and monetary support for economies recovering from the pandemic.

“India’s response so far has been tepid compared to other key nations and therefore the recovery is welcome and so is the need for the hour,” said Madhavi Arora, chief economist at Edelweiss FX and Rates.

“It is necessary to see how much it will be in the form of direct budget support to measure the immediate fiscal impact and the consequent sources of financing.”