Nirmala Sitharaman: Lessons of 2008-13 guided coronavirus stimulus: Nirmala Sitharaman


The government kept the lessons of the 2008-13 period in mind when designing its ₹ 20 lakh crore stimulus package, finance minister Nirmala Sitharaman told ET, explaining why it had avoided spending recklessly to revive the economy. She was referring to the programme implemented in the wake of the global finance crisis and its aftermath.

Sitharaman said in an interview that the steps that have been announced since last week cannot be boxed into “supply side measures” as they put money in the hands of people who will spend and create demand. The finance minister also said the government wants to help migrants but does not have the data to reach out to them.

On the issue of a bigger stimulus through monetisation, she said all suggestions had been considered and this was the call that had been taken, referring to the programme that has been announced. The government had made a rough assessment of how much the guarantees that have been announced would cost, although given the nature of the crisis, it is difficult to put a number to this as of now.


“As we go forward we have to keep assessing,” she said when asked if more measures will be announced. Experts estimated the direct impact of the package on the budget at about ₹2 lakh crore or less than 1% of GDP. “Mostly I would say, coming from the learning based on the experiences of 2008-13 — that’s one of the reasons why we have taken this course,” she said.

Many experts had endorsed Indian industry’s demand for a big stimulus backed by monetisation of debt by the central bank, a suggestion the government seems to have ignored, taking a more cautious approach.

India’s macroeconomic balance had deteriorated toward the end of the United Progressive Alliance (UPA) government’s second term (2009-14), following a large stimulus by the government to tide over the impact of the global financial crisis. Inflation spiked to double digits, the balance of payments worsened amid capital outflows and the currency depreciated.

Sitharaman said the government had also reviewed measures elsewhere while designing its relief package. “We looked at various countries’ response… everyone has done a basket,” she said. “It’s a mix and match of various, each according to states’ availability.”

She countered the criticism from various quarters that the package was largely made up of supply-side measures and didn’t contain much that would boost demand.

Designed for Benefit of all Sectors

“When banks are giving additional term loans or working capital, what are they going for?” she said, adding that the funds will be spent for starting businesses.

“And that is actually going to generate demand, that is actually going to put money in the hands of people who will in turn spend. So, strictly supply-side measures also have a demand-side component.”

The programme includes ₹3 lakh crore of collateral-free loans guaranteed by the Centre for MSMEs.

Besides, the extra ₹40,000 crore for MGNREGA will put money in people’s hands, she said.

She said the package has been designed in such a way that every sector benefits, responding to the question that there was no direct support for stressed industries such as aviation and hospitality.

“Somewhere, every sector, even though I have not named each one, will be touched by the banks being able to extend, without additional collateral,” she said. It’s “designed with everybody in mind and therefore every sector will benefit from what we are doing.”

Prime Minister Narendra Modi had unveiled the ₹20 lakh crore Atmanirbhar Bharat Abhiyaan in a speech last week. The finance minister announced the various components of the programme over the next five days.

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