GDP Loss Is Already at Rs 20 Lakh Crore Due To Lockdown I Mitali Mukherjee I The Wire I Lockdown
- 3 years ago
The Prime Minister announced a 20 lakh crore package that would translate into a spend of almost 10% of GDP, in order to boost the economy.
However the figure has left many wondering what the sum total of spend might be, considering that this figure also includes measures announced by the RBI and the smaller package that was announced earlier by the Finance Minister.
Former Finance Secretary Subhash Chandra Garg believes that given the amount already announced the actual figure in terms of fiscal outgo is probably between Rs 5 -6 lakh crores.
He also points out that the government is already haemorrhaging with its own losses – it has lost close to Rs 20 lakh crores in GDP through the weeks of shutdown and is also facing a tax shortfall of between Rs 4 – 5 lakh crores.
While it has not been seen as the global norm in any country, to include the Central Bank’s efforts as the Government’s stimulus package, Mr Garg says that even if one considers it as all “stimulus oriented” spend, the bigger point of pain lies in the large Indian workforce. The thrust of the package must be direct money transfers, in order to make any meaningful impact on recovery. Garg also believes that any direct transfer figure lower than Rs 10 lakh crores won’t make a difference to the current situation.
He also believes it is unlikely there will be any tax relief announced for individuals – neither is it an efficient mechanism ( because of a slow trickle-down effect), nor does the tax paying community constitute a large enough catchment area in terms of alleviating economic pain.
The big question remains, with a large tax shortfall, a hike in its borrowing limits and a new stimulus package announcement – where will the government get the money from ?
Mr Garg says the government may not need to ‘print more money’ as there is ample liquidity parked with banks. There’s no need for monetisation as banks are replete with liquidity, since there is no demand, either from corporates or from individuals.
Bank liquidity, he feels will be a key indicator of whether the economy is moving out of its lock jam or not.
However the figure has left many wondering what the sum total of spend might be, considering that this figure also includes measures announced by the RBI and the smaller package that was announced earlier by the Finance Minister.
Former Finance Secretary Subhash Chandra Garg believes that given the amount already announced the actual figure in terms of fiscal outgo is probably between Rs 5 -6 lakh crores.
He also points out that the government is already haemorrhaging with its own losses – it has lost close to Rs 20 lakh crores in GDP through the weeks of shutdown and is also facing a tax shortfall of between Rs 4 – 5 lakh crores.
While it has not been seen as the global norm in any country, to include the Central Bank’s efforts as the Government’s stimulus package, Mr Garg says that even if one considers it as all “stimulus oriented” spend, the bigger point of pain lies in the large Indian workforce. The thrust of the package must be direct money transfers, in order to make any meaningful impact on recovery. Garg also believes that any direct transfer figure lower than Rs 10 lakh crores won’t make a difference to the current situation.
He also believes it is unlikely there will be any tax relief announced for individuals – neither is it an efficient mechanism ( because of a slow trickle-down effect), nor does the tax paying community constitute a large enough catchment area in terms of alleviating economic pain.
The big question remains, with a large tax shortfall, a hike in its borrowing limits and a new stimulus package announcement – where will the government get the money from ?
Mr Garg says the government may not need to ‘print more money’ as there is ample liquidity parked with banks. There’s no need for monetisation as banks are replete with liquidity, since there is no demand, either from corporates or from individuals.
Bank liquidity, he feels will be a key indicator of whether the economy is moving out of its lock jam or not.