Coronavirus stimulus: How effective will Rs 20.9 lakh crore COVID-19 package be?
The most important component of the government's initiatives and recurring theme across most tranches of stimulus announcements was the thrust towards promoting private businesses by easing regulations and drafting new ones

- May 17, 2020,
- Updated May 17, 2020 10:49 PM IST
The Prime Minister Narendra Modi-led government has unveiled Rs 20.9 lakh crore coronavirus stimulus in five daily doses. The final tranche of the relief package came on Sunday, the 54th day of the nationwide lockdown. In Modi's own words, the package is meant to give a fresh impetus to India's journey in becoming self-reliant or Atma Nirbhar. But, don't get carried away by the loftiness of Atma Nirbhar. India's stimulus package, like stimuluses offered by every other country fighting the global pandemic, has to achieve certain basic objectives before self-reliance and long term growth plans can play out.
The first is the effective tackling of the pandemic. Unless that happens, economic disruptions will continue, taking a toll on both life and livelihood of people. The second is to help Indian economy withstand the current crisis, by helping not just individuals, but also enterprises, primarily small and medium scale units. This is because they also need to retain the jobs they provide, manage recurring costs and absorb the lockdown linked production losses. Money in the hands of people is a precondition to restore demand, which is an essential condition to restrict the cycle of demand-supply based economic growth. There has to be a stimulus to re-start the economy in the post-lockdown period too.
India seems to have managed the first challenge, that of fighting COVID-19, better than several other countries, at least until now. The comparatively moderate increase in the number of coronavirus cases suggests that despite its weak health infrastructure, India's efforts have so far been impressive at a global level. The government has been able to ramp up production of masks, personal protection equipment (PPE), medicines. It also significantly increased the number of COVID-19 tests. In addition, it announced a Rs 15,000 crore health package and a Rs 50 lakh insurance per person scheme for up to 22 lakh health workers fighting COVID-19 much before the structure of the coronavirus stimulus was rolled out. A World Bank supported scheme to strengthen India's epidemic preparedness by setting up testing laboratories even at a district level has also been sanctioned. In short, at the moment, India looks fine with its health response.
That leaves us with the other two objectives, both meant to revive and strengthen Indian economy - to put more money into the hands of people and businesses to reduce the impact of the economic distress caused by the lockdown and stimulate demand, and to adopt measures to speed up the economic recovery post-lockdown while attempting to become Atma Nirbhar. Broken supply chains is also a problem, but it is temporary in nature. It is likely to get restored automatically once the lockdown gets lifted.
Is the stimulus good, big and focused enough for a demand-led economic revival and growth? There may not be an easy answer. In fact, the stimulus is a mix of direct transfer of money and food grains, indirect support to enable businesses and individuals to borrow more money from banks and other financial institutions to tide over liquidity crisis, and a bunch of policy measures to help private industry and attract foreign investments into India. However, unlike most developed countries, the component of direct cash transfer, is very small in India's stimulus package.
The Prime Minister Narendra Modi-led government has unveiled Rs 20.9 lakh crore coronavirus stimulus in five daily doses. The final tranche of the relief package came on Sunday, the 54th day of the nationwide lockdown. In Modi's own words, the package is meant to give a fresh impetus to India's journey in becoming self-reliant or Atma Nirbhar. But, don't get carried away by the loftiness of Atma Nirbhar. India's stimulus package, like stimuluses offered by every other country fighting the global pandemic, has to achieve certain basic objectives before self-reliance and long term growth plans can play out.
The first is the effective tackling of the pandemic. Unless that happens, economic disruptions will continue, taking a toll on both life and livelihood of people. The second is to help Indian economy withstand the current crisis, by helping not just individuals, but also enterprises, primarily small and medium scale units. This is because they also need to retain the jobs they provide, manage recurring costs and absorb the lockdown linked production losses. Money in the hands of people is a precondition to restore demand, which is an essential condition to restrict the cycle of demand-supply based economic growth. There has to be a stimulus to re-start the economy in the post-lockdown period too.
India seems to have managed the first challenge, that of fighting COVID-19, better than several other countries, at least until now. The comparatively moderate increase in the number of coronavirus cases suggests that despite its weak health infrastructure, India's efforts have so far been impressive at a global level. The government has been able to ramp up production of masks, personal protection equipment (PPE), medicines. It also significantly increased the number of COVID-19 tests. In addition, it announced a Rs 15,000 crore health package and a Rs 50 lakh insurance per person scheme for up to 22 lakh health workers fighting COVID-19 much before the structure of the coronavirus stimulus was rolled out. A World Bank supported scheme to strengthen India's epidemic preparedness by setting up testing laboratories even at a district level has also been sanctioned. In short, at the moment, India looks fine with its health response.
That leaves us with the other two objectives, both meant to revive and strengthen Indian economy - to put more money into the hands of people and businesses to reduce the impact of the economic distress caused by the lockdown and stimulate demand, and to adopt measures to speed up the economic recovery post-lockdown while attempting to become Atma Nirbhar. Broken supply chains is also a problem, but it is temporary in nature. It is likely to get restored automatically once the lockdown gets lifted.
Is the stimulus good, big and focused enough for a demand-led economic revival and growth? There may not be an easy answer. In fact, the stimulus is a mix of direct transfer of money and food grains, indirect support to enable businesses and individuals to borrow more money from banks and other financial institutions to tide over liquidity crisis, and a bunch of policy measures to help private industry and attract foreign investments into India. However, unlike most developed countries, the component of direct cash transfer, is very small in India's stimulus package.