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| @ | May 16,2020

FISCAL Stimulus-I, like the mountain which heaved and heaved before releasing its mouse, offered the nation  Rs. 1.7 lakh crore in March of this year. Ever since, many of us have been waiting with bated breath for the message announcing the second instalment of the stimulus. Nor did it fail to blow one away, when the Prime Minister, in his address to the nation on May 12th, informed us that the package was worth Rs. 20 lakh crore, or 10 per cent of GDP! The critics of Fiscal Stimulus-I would surely have to eat crow now, given that the sequel to FS-I turned out to be not so much FS-II as Superman-II.

Well, the critics were certainly in an unenviable position for all of the next 24 hours, after which the dietary restriction was lifted with the Finance Minister, on the following two days, opening up the Package to let us see what was inside.  For what was inside was something like this.

First, it appears that FS-I was already part of FS-II. Additionally, here is what a perusal of various financial and other newspapers and websites (LivemintBusiness TodayEconomic TimesMoneycontrol.comThe Indian Express, The New Indian Express, etc.) suggest:

The Rs. 20 lakh crore Package likely includes:

a prior reduction of various taxes (corporate, dividend distribution, and personal income), amounting to Rs. 2.10 lakh crore;

two monetary stimulus packages announced by the RBI in February and April 2020, mainly providing liquidity and making credit available to industry through banks, together adding up to Rs. 6.54 lakh crore;

collateral-free automatic loans for businesses, including Medium and Small Manufacturing Enterprises (MSMEs), amounting to Rs. 3.0 lakh crore;

subordinated debts for MSMEs, amounting to Rs. 0.2 lakh crore;

equity infusion for MSMEs, amounting to Rs. 0.5 lakh crore;

EPF (Employees Provident Fund) support for Businesses and Workers, amounting to Rs. 0.025 lakh crore;

a special liquidity scheme for 3 months for Non-Bank Financial Companies (NBFCs) and Micro-Finance Institutions (MFIs), amounting to Rs. 0.30 lakh crore;

liquidity injection for Distribution Companies (DISCOMs), amounting to Rs. 0.90 lakh crore;

liquidity relief through reduction in Tax Deducted at Source (TDS) and Tax Collected at Source (amount not known);

concessional credit for 25 million agricultural farmers, and also fishermen and animal husbandry farmers under the PM-Kisan scheme, amounting to Rs. 2 lakh crore;

Additional Emergency Working Capital funding for farmers through the National Bank for Agriculture and Rural Development (NABARD), amounting to Rs. 0.3 lakh crore;

extension of the Credit Linked Subsidy Scheme for the housing sector and middle income group, amounting to Rs. 0.7lakh crore;

a Special Credit Facility for street vendors, amounting to Rs. 0.05 lakh crore;

promotion of Affordable Rental Housing Complexes (ARHC) for migrant workers and the urban poor, in a scheme whose physical contours and fiscal provision are as yet not quite clear;

food grains for non-ration card holders  (5 kg of wheat/rice per person and 1 kg chick-pea per family) for 2 months, intended to cover 80 million migrants, amounting to Rs. 0.035 lakh crore; and

sanction for the use of ration cards anywhere in the country, with financial implications which are not yet clear.

Adding up all of the figures in bold font above, we obtain a sum of Rs. 19.5 lakh crore of which, arguably, it is only the paltry EPF support of Rs. 0.025 lakh crore and the similarly paltry Rs. 0.035 lakh crore provision for food grains to migrant workers without ration cards, together adding up to Rs. 0.06 lakh crore, which constitue government spending, properly speaking, and attract the label of ‘fiscal stimulus’—the rest of the items being loans and liquidity injections from the central bank and nationalised banks, or reductions in provident fund contributions and taxes deducted/collected at source. In fact, among the promised ‘fiscal stimuli’ are also deferred tax payments and tax refunds! So, of the Rs. 19.5 lakh crore of the package that has been accounted for, what properly constitutes a fiscal stimulus in the form of actual government expenditure is probably of the order of Rs. 0.06 lakh crore, or less than one-third of one per cent of the package.

Finally, and lest it be thought that migrant labourers have not been given their due relief in the package, let it be pointed out that there is stirring news from the PMO: the PM Cares Fund will release all of Rs. 0.01 lakh crore for the care of migrant workers, and Rs. 0.021 lakh crore for the purchase of  vaccine and ‘Made in India’ ventilators. In G. V. Desani’s classic 1948 novel All About H. Hatterr, the protagonist recalls the miserly head of his orphanage, a man who, we are told, would ‘…shower on you a penny and warn you not to squander it on woman, and wine, and song!’ How unlike the PM Cares Fund, which showers its penny and squanders it on vaccines and ventilators and migrant labourers!

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