‘Awesome’! Modi’s economic package receives high praise from the UN; top experts praise Rs 20 lakh cr encouragement

Prime Minister Narendra Modi on Tuesday announced new massive financial incentives in addition to the previously announced packages for a combined stimulus of Rs 20 lakh crore ($ 260 billion). (IE Photo)

The UN’s top economic experts have called the stimulus package of Rs 20 lakh crore “impressive”, the largest yet among developing countries, announced by India to revive the country’s economy, which has been severely affected by the blockage caused by the coronavirus.

Prime Minister Narendra Modi on Tuesday announced new massive financial incentives in addition to the previously announced packages for a combined stimulus of Rs 20 lakh crore ($ 260 billion).

While releasing the update to the World Economic Outlook and Outlook (WESP) report on Wednesday, the Head of the Global Economic Monitoring Branch, Hamid Rashid, told reporters in response to a question that the stimulus package announced by the Indian government Tuesday is a very welcome event. “

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He said the Rs 20 lakh crore package, which is 10 percent of India’s GDP, is the ‘largest so far in developing countries because most developing countries have been implementing stimulus packages that represent between 0.5 percent and 1 percent of GDP.

“India’s stimulus packages are very large. And also India has the internal financial market and the great capacity to implement that great stimulus package,” he said, adding that the impact of the package would depend on the design of the stimulus.

The mega Rs 20 lakh crore stimulus package includes previously announced measures to save the blockade-hit economy and focuses on small business tax exemptions as well as incentives for domestic manufacturing.

The combined package represents approximately 10% of GDP, making it one of the most important in the world after the financial packages announced by the US. The USA, which represents 13% of its GDP, and Japan, which exceeds 21% of its GDP.

Associate Economic Affairs Officer, Economic Policy and Analysis Division, Department of Economic and Social Affairs (EAPD / UN DESA), Julian Slotman, told PTI in an interview that the size of India’s stimulus package is “impressive” and it appears to be of a magnitude that will help reassure markets and boost domestic consumption. But at the same time, when people simply cannot spend, economic growth cannot be expected to magically reappear suddenly.

After praising the Indian government for implementing a strict blockade while the number of COVID19 cases was relatively low, he said that at some point it will be inevitable to gradually reduce the restrictions, but warned that this could lead to increased infections in the country.

“Fortunately in India, the central government acted very decisively in implementing the national blockade” when the number of virus cases was relatively low and “appears to have slowed the spread of the disease somewhat,” he said.

“Decisive containment measures are absolutely necessary and a strong blockade is critical in India.” he said, adding that the duration of the blockade must also be economically feasible. “It is putting tremendous pressure on the Indian economy and, of course, disproportionately harming the most vulnerable and poor people.”

He said that in India priority should be given to reducing uncertainty first so that people can go out and spend again. He urged the Indian government to exercise the utmost caution to ease the blockade, saying that the country must not “accelerate anything unnecessarily.” There are ways to gradually lift the restrictions, ”he said.

She added that with a large informal sector in India, the blockade has disproportionately affected women and migrant workers.

Meanwhile, the UN cut India’s projected GDP growth rate to 1.2 percent in 2020-21 on Wednesday as the COVID19 pandemic ravages the global economy.

In the WESP report update, the UN DESA said global GDP is forecast to contract sharply by 3.2 percent as the COVID-19 pandemic paralyzes the world, drastically restricting economic activities, increasing uncertainties and unleashing a recession never seen since the Great Depression.

“Cumulatively, the world economy is expected to lose almost $ 8.5 trillion in production in 2020 and 2021, almost eliminating the accumulated gains of the past four years,” the report said.

India’s economic growth is forecast to slow to 1.2 percent in the current fiscal year, a further deterioration in already slowed growth of 4.1 percent in 2019. India, which grew to 6.8 percent in the fiscal year, is forecast 2018, it will recover and record a growth rate of 5.5 percent in 2021.

The Economic Survey, released a day before Finance Minister Nirmala Sitharaman presented the Union Budget for 2020-21 on February 1, had projected GDP growth of 6-6.5 percent, above 5 estimated percent for 2019-20.
“The national shutdown in India, for example, is expected to depress economic growth to just 1.2 percent, much lower than the already disappointing growth in 2019,” the report said.

Despite the considerably slower growth rate of 1.2 percent, India remains the second-fastest-growing major economy in the world after China.

According to the report’s estimates, India and China are the only two economies in the world that are not expected to decline in 2020 despite their growth rates slowing down considerably. While India could post 1.2 percent GDP growth, China is estimated to post a 1.7 percent growth rate.

All other economies in the world, including the US, are projected. USA (-4.8 percent), Japan (-4.2 percent), the European Union (-5.5 percent) and the United Kingdom (-5.4 percent) decreased this year.