Stimulus package 2020: Immediate relief worth Rs 80,000 cr only; combined fiscal dent to be 12%: CARE Ratings

With the announcement of the last tranche of the Rs 20 lakh crore coronavirus relief package on Sunday, estimates suggest capital of only Rs 75,000-80,000 crore will be available for immediate relief to the economy.

The government on Sunday announced a Rs 40,000 crore increase in allocation for the flagship Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which would take the overall corpus to more than Rs 1 lakh crore, the highest ever since the scheme was introduced in 2006. It can potentially offer employment of 100 days to over 2 crore migrants in the country.

"The break-up of the Rs 20 lakh crore shows the RBI has a share of Rs 8 lakh crore, while another Rs 1.9 lakh crore was announced earlier before this grand package. Hence these five tranches provide for Rs 10 lakh crore," CARE Ratings said in a note.

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"The actual outflow from the Budget is not clear. It looks like that there could be Rs 75,000-80000 crore which could go immediately, while the tranche three packages of Rs 1.5 lakh crore would be provided for over a period of time and not immediately as the targets are fairly long-term and it is not clear if organisations like NABARD would be playing a role."

Other announcements include more flexibility for states to borrow money for welfare schemes and reforms, allowing private companies to list in overseas markets and opening up all sectors of the economy to the private sector, while restricting the role of public sector enterprises even in strategic sectors.

"The states have been given more flexibility on fiscal deficit, with conditions. However, for the subsequent movement they need to get their act together doing discoms reforms, ULB revenue, ration card and ease of doing business," it said.

"These four conditions are quite open-ended and would have to be defined by the Centre or else there could be ambiguity. Potentially, there can be Rs 4.28 lakh crore of borrowing by states, which is equivalent to the higher borrowing of the Centre already announced. This means if both Centre and states go at this target, the combined fiscal deficit can be in the region of 11-12 per cent."

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