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Sitharaman said in an interview that the steps that have been announced since last week cannot be included in “supply-side measures” as they put money in the hands of people who will spend and create demand. The finance minister also said that the government wants to help migrants but does not have the data to communicate with them.
On the subject of further stimulation through monetization, he said that all suggestions had been considered and this was the call that had been made, referring to the program that had been announced. The government had made a rough assessment of how much the announced guarantees would cost, although given the nature of the crisis, it is difficult to assign a number to this as of now.
“As we move forward we have to keep evaluating,” he said when asked if more measures would be announced. Experts estimated the direct impact of the package on the budget at approximately Rs 2 lakh crore or less than 1% of GDP. “I would primarily say that, coming from 2008-13 experience-based learning, that’s one of the reasons we’ve taken this course,” he said.
Many experts backed the Indian industry’s demand for a big stimulus backed by central bank debt monetization, a suggestion the government appears to have ignored, taking a more cautious approach.
India’s macroeconomic balance had deteriorated towards the end of the United Progressive Alliance (UPA) government’s second term (2009-14), after a strong stimulus from the government to overcome the impact of the global financial crisis. Inflation shot up to double digits, the balance of payments worsened amid capital outflows, and the currency depreciated.
Sitharaman said the government had also reviewed measures elsewhere while designing its aid package. “We look at the response from various countries … they have all made a basket,” he said. “It is a combination of several, each depending on the availability of the states.”
She responded to criticism from various sectors that the package was comprised primarily of supply-side measures and did not contain much that would drive demand.
Designed for the benefit of all sectors
“When banks make additional term loans or working capital, what are they doing?” she said, adding that the funds will be spent to start businesses.
“And that will actually generate demand, it will actually put money in the hands of people who in turn will spend. Therefore, strictly supply-side measures also have a demand-side component. ”
The program includes ₹ 3 lakh crore of unsecured loans guaranteed by the Center for MSMEs.
Furthermore, the additional Rs 40 billion for MGNREGA will put the money in the hands of the people, he said.
She said the package has been designed in such a way that all sectors benefit, answering the question that there was no direct support for stressed industries such as aviation and hospitality.
“Somewhere, all sectors, although I have not named every one, will be affected by banks that can extend, without additional guarantees,” he said. It is “designed with everyone in mind and therefore each sector will benefit from what we are doing.”
Prime Minister Narendra Modi unveiled the Rs 20 lakh crore Atmanirbhar Bharat Abhiyaan in a speech last week. The finance minister announced the various components of the program over the next five days.
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