Prime Minister Narendra Modi said in his address to the nation on May 12, the Atmanirbhar Bharat Abhiyan economic package is worth Rs 20 lakh crore, which is around 10% of India’s GDP in the 2019-20 financial year.The government has announced a five-part package and has provided details of how it adds up to Rs 20.97 lakh crore and accounts for nearly 10% of the gross domestic product (GDP).
Finance minister Nirmala Sitharaman has said that the package includes the liquidity measures announced by the RBI (Reserve Bank of India) and the PM Garib Kalyan Yojana, which the finance ministry unveiled as soon as the national lockdown was ordered.
But over a dozen banks, brokerages and ratings agencies have said the package falls short of 10% of GDP and works out to around 1% and may not be enough to address the large-scale devastation inflicted by the pandemic across crucial sectors of the economy
With a nationwide lockdown for the better part of April and May, the total quantum of economic activity in the country — measured by the monetary value of all goods and services produced — has sharply curtailed.
As incomes fall, three things will happen.
One, individuals (like you and me) will cut down their expenditure. In particular, all discretionary expenditure — be it an additional pack of cigarettes or a new car or a house — will come down sharply.
Two, seeing overall demand fall, businesses, which were already not investing, will likely postpone their investments further.
Three, the government revenues will take a massive hit. This means that if the government wants to maintain its level of fiscal deficit (the gap between what it earns as revenues and what it spends), it will have to cut its overall expenditure this year.
These three types of “expenditures” — by individuals, businesses and government — essentially make up the GDP of India. There is a fourth component called net exports (that is, the net of exports and imports), but with the global demand plummeting as well, this too is unlikely to help matters.
According to an assessment by Prof N R Bhanumurthy of the National Institute of Public Finance and Policy (NIPFP) and published by National Council of Applied Economic Research (NCAER), the way things are going, India’s GVA will contract by a whopping 13% this year under the Base case scenario The Base case scenario refers to a scenario where governments (both Centre and states) bring down their expenditure in line with their falling revenues to maintain their fiscal deficit target.
only if the government spends 3% of the GDP over and above what it promised to do in the Union Budget 2020-21, will the economic growth stay in the positive territory. Short of that, the Indian economy will contract. Of course, higher public spend will come at the cost of higher levels of fiscal deficits and higher inflation, but a growth contraction will come at the cost of widespread economic ruin, job losses and even deaths.
At present, there is no sure-shot way of knowing what will be the final level of government spending at the end of this financial year. Most calculations suggest that — far from the promised level of 10% of the GDP — the actual government expenditure in the Atmanirbhar Bharat Abhiyan is just 1% of GDP. And we still don’t know if this 1% (of GDP) expenditure is over and above the Budgeted expenditure or will it be funded by expenditure cuts elsewhere.
It is clear then that Atmanirbhar Bharat Abhiyan economic package is likely to do little for India’s economic growth in this financial year, and that is why it is being criticised.
But here is FM's answer to all criticism .....
The intent is not to understand but to pick holes, said Finance minister Nirmala Sitharaman in response to the questions about the fiscal stimulus package of Rs 20 lakh crore being called “too little, too late”.
The FM underlined that the idea is to restart economic activity, put some cash in peoples hands, and infuse liquidity in the system. She was in conversation with party colleague Nalin Kohli answering various facets of the recently announced economic package.
“We compared announcements made by other countries. We should be not confused about this. Every country has brought in a basket of things, some fiscal, some monetary...They have also gone into liquidity being infused. We are not different form them. The proportion might vary. We have come with measures which will get more liquidity into the market. People will get money in hand and kickstart demand,” the FM said.
Elaborating the government’s approach, the FM said the government has heard everybody and then gone about stimulating economy, restarting companies and giving relaxations.The banks, she said, have been told to disburse loans and not fear the 3Cs: the Central Bureau of Investigation (CBI), the Central Vigilance Commission (CVC) and the Comptroller and Auditor General of India (CAG).
“Have spent time with banks that fear of three 3Cs - CBI, CVC, CAG - should not be in their mind. We discussed threadbare where this fear comes from. If a decision goes wrong, banks are assured that no action will be taken if the decision is not malafide,” said the FM.
“The initial panic was on the EMIs, so worked with the RBI and they responded. I tend to think middle class is there in every segment, like in farm related allied activities, say, you could be part of dairy activity, an intrepreneur,” said the FM.
She said relief was also provided to the middle class in the budget announcements and pointed to the income tax changes.
The conclusion of the this article can only can be predicted after we see if the indian economy rises to heights or goes in the opposite direction . Int his case if you ask me my opinion i would say " you win you lose some " not everything can be perfect . I would wanna believe both sides but i have given you content on both sides and now it is for you decide which wins .... but coming to a conclusion only days into the package seems too utopian to give an opinion about ... Lets wait and watch .... Thats literally only thing i can say right now and we all can do ...
i ve always heard my mom say " THE BEST WORD IS WORK" so lets conclude with this for now ...
Again it is clearly evident how well researched this article is , with the base case scenario and how much percent of the gdp the Government is actually spending. But the best part was the conclusion and what you are saying is so true: now that the seeds have been sown lets wait and see whether it reaps or not.