A day after the RBI projected economic contraction in 2020-21, Finance Minister Nirmala Sitharaman on Saturday said future fiscal policy actions to stimulate the economy will depend on how COVID-19 pandemic pans out.
The government has already announced a Rs 20.97 lakh crore economic package, which includes Reserve Bank’s Rs 8.01 lakh crore worth of liquidity measures till May 17.
Sitharaman said making a “realistic assessment” of economic growth would be difficult at this point of time as there is no clarity on when the pandemic would retreat.
“I’m not closing the door at all. I want to keep getting inputs from industry, implement what we have announced and depending on how things pan out we have to respond accordingly. We are only 2-month old in this year, we have 10 months to go,” Sitharaman said in a conversation with BJP leader Nalin Kohli.
The Reserve Bank on Friday had said the impact of COVID-19 is more severe than anticipated and the GDP growth during 2020-21 is likely to remain in the negative territory. It projected some pick-up in growth impulses from second half (October-March) of 2020-21 onwards.
Last week, the minister had announced an economic packages five tranches, which included a Rs 3.70 lakh crore support for MSMEs, Rs 75,000 crore for NBFCs and Rs 90,000 crore for Power distribution companies, free foodgrains to migrant workers, increased allocation for MGNREGS, tax relief to certain sections and Rs 15,000 crore allocated to the healthcare sector to deal with the pandemic.
The package was done in consultation with economists, academicians, ex-bankers, ex-finance ministry officials and industry, Sitharaman said, adding the idea was to make available more liquidity in the economy and revive demand, Sitharaman said.
“The package was designed keeping in mind that we are facing a situation which is exceptional and therefore whether the contraction is going to be this much or that much, we didn’t have the luxury of data to guess-estimating them. However, the spirit of that thought has been kept in mind that we have to now look at complete contraction and if we have to stimulate the economy keeping that in mind what is that we have to do,” she said.
Sitharaman said the approach has been to go through this route of stimulating the economy through companies, institutions, enterprises and businesses all getting assistance by banks or formulations through which businesses restart.
“I’m sure the Indian entrepreneurs are also going to come out after they test the waters post the lockdown…We have come with measures which will get more liquidity in the economy, if there is more liquidity in economy people will get money in their hands and that will kick-start economy, bring more demand, she said.
Sitharaman further said that the government is working to further speed up FDI clearances by administrative departments, providing policy certainty and easing compliance burden for companies.
COVID-19, the disease caused by coronavirus, has claimed 3,720 lives in India while the number of infected stood at over 1.25 lakh.