Business

‘Stimulus 3.0 supportive for growth, fiscal impact unclear’

India’s third tranche of stimulus measures should support economic rebound over the coming quarters but the actual fiscal impact is difficult to ascertain, Fitch Solutions said on Monday.

The government on November 12 announced another stimulus package, called Aatmanirbhar Bharat Abhiyaan 3.0, totalling ₹2.65 lakh crore.

The package included a boost to formal employment, the Production Linked (PLI) Scheme, an increase in the fertiliser subsidy and the rural employment programme MGNREGA.

In a report, Fitch Solutions said India’s fiscal deficit is likely to be 7.8% of the GDP in the FY21. “While many of (Stimulus 3.0) scheme should be supportive to India’s economic rebound over the coming quarters, the actual impact on public finances is difficult to ascertain,” Fitch said.

The PLI scheme, for instance, spans across a five-year period, and its fiscal impact will likely only be seen from FY2021-22 onwards, it said.

Additional expenditure

“Estimating using the outright fiscal outlays from this announcement, ‘Stimulus 3.0’ appears to suggest additional expenditure of ₹1 lakh crore [0.44% of FY2019/20 GDP],” it said.

Moreover, the announcement did not outline any additional borrowing to finance these additional spending, which suggests a reallocation of FY2020/21 budget expenditure plans instead, Fitch added.

Exactly a month after the ‘Aatmanirbhar Bharat Abhiyaan 2.0’ package — which included announcements regarding consumption and investment — was announced on October 12, the central government came out with its third round of stimulus package.

Stimulus 3.0 package included ₹1.6 lakh crore toward the PLI Scheme and the remaining ₹1.2 lakh crore toward the other 11 announcements. such as the extension of the Emergency Credit Line Guarantee Scheme (ECLGS 1.0) up to March 31, 2021, the launch of ECLGS 2.0 for the 26 stressed sectors, income tax relief for developers and home buyers, and budget outlay for R&D toward the COVID-19 vaccine.

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Printable version | Jan 16, 2021 8:18:59 AM | https://www.thehindu.com/business/stimulus-30-supportive-for-growth-fiscal-impact-unclear/article33110168.ece

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