Atmanirbhar Bharat 3.0 stimulus measures include additional funding for many sectors
New Delhi:
The government today announced new measures to support the manufacturing sector and create jobs after the Reserve Bank of India said the country would enter a recession with estimates of another quarterly contraction. The country’s economy has been severely affected by the coronavirus pandemic, with growth contracting by a record 23.9% between April and June. “India has entered a technical recession in the first half of 2020-21 for the first time in its history,” said the Reserve Bank of India or RBI.
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The economy was estimated to contract 8.6 percent in the quarter ending in September, resulting in a “technical recession” that occurs with two consecutive quarters of negative growth, the RBI said in its report.
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The International Monetary Fund said last month that India’s economy would contract 10.3 percent for the year.
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Finance Minister Nirmala Sitharaman said today the economy was recovering strongly, noting that global rating agency Moody’s revised India’s calendar year contraction to minus 8.9 percent from its previous estimate of minus 9 , 6 percent. “(It is) indicative that the corrections are happening in a positive direction,” he told reporters in Delhi.
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The RBI also added that “the contraction is decreasing with the gradual normalization of activities and is expected to be short-lived.” Official gross domestic product figures for July-September will be released on November 27.
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Even before Prime Minister Narendra Modi announced a strict shutdown in late March, India’s economy was already sluggish, burdened by record unemployment and a series of bad loans that made banks reluctant to lend.
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Ms Sitharaman announced some Rs 1.9 lakh crore in new measures to support the manufacturing sector and create jobs. They include incentives to produce goods and services locally, as well as benefits for foreign companies that invest in Indian companies.
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They add to the rupee package of rupees 19.6 million announced by Prime Minister Narendra Modi in May to revive the stuttering economy. RBI economists, however, warned that households still face financial stress. “Stress is intensifying among households and corporations that has been delayed but not mitigated and could spread to the financial sector,” RBI wrote in the report.
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“The recession is historically unprecedented due to the magnitude of the decline, so we are seeing a year-round decline from minus 5 to minus 10 percent,” Mumbai economist Ashutosh Datar told AFP news agency. “Another aspect that is crucial is that the economy is much bigger now and India has global ties, which was not the case before the 1991 (economic) liberalization,” he said.
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Atmanirbhar Bharat 3.0 stimulus measures announced today include additional financing for developers and real estate contractors, subsidies for fertilizers, incentives for job creation and additional spending on rural jobs.
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The latest package comes at a time when many economists have called for more stimulus measures to revive the economy, which is headed for its worst annual contraction in more than four decades, saying more needs to be done to create jobs and boost demand.
With contributions from AFP
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