Will the over Rs 20 lakh crores of Atmanirbhar package, the details of which were announced by Finance Minister Nirmala Sitharaman across five days last week, revive the economy left crippled in the aftermath of the coronavirus pandemic and lockdown?
There's no straight answer, but ratings agency Crisil believes that the stimulus package may revive the supply side but not the consumer-demand side.
"While most steps from government are steps in the right direction, it is unlikely to stimulate demand/consumption given that the package is more focussed on supply-side reforms," its research wing said in a note.
The package which took Finance Minister Nirmala Sitharaman a marathon of five days to deliver has met with criticism. The opposition has pointed out that the measures announced were barely 1 percent of the GDP. The Congress highlighted that the government was spending Rs 1.86 lakh crores as a fiscal stimulus and there was head-room for further borrowing.
While MSME sector remained the lead benefactor of the package's liquidity and bank loans, other sectors such as hospitality, tourism, healthcare, auto sector, unorganized retail, and even self-employed complained of finding nothing in the package.
The rating agency in its recent note has highlighted the absence of dedicated steps for troubled sectors.
"Further, while the government has not added much to its current year fiscal outgo – and thereby deficit – it will weigh on public debt next fiscal unless the economy revives," it warned.
The package allows state governments to borrow more as a percentage of their finances, and accounted for Rs 1.50 lakh crore as additional headroom created in the package. The states' strategies will now be a key monitorable, the agency said. The agency also said that the actual fiscal impact of the announcements is far lower than the headline amount of the stimulus because a lot of the measures are through aspects like guarantees.
At Rs 1 lakh crore, the actual fiscal outgo is just 9 per cent of the Rs 11 lakh crore worth of measures announced by Sitharaman, it said. "Given the fiscal constraints, the government has undertaken measures that can magnify the impact of every rupee of stimulus. Hence the liberal use of guarantees and tiered funding structures," it said.
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