The capital markets today red flagged the much hyped mega stimulus package by PM Narendra Modi. The package which created much euphoria when it was announced on 12th of May by the prime minister turned out to be a sentiment dampener.
Some of the reforms announced in the package are no doubt path breaking but it will have a medium to long term impact , 300000 crore allocated to provide liquidity to the MSME’s by providing them automatic collateral free loans for their immediate working capital needs along with 50000 cr equity infusion through a fund of funds will probably provide some breathing space to the sector.
A cut of 25% amounting to 50 000 cr has also been announced in TDS&TCS along with measures relating to EPF(amounting to 9550 crores) coupled with the extension of the subsidy scheme for the affordable housing will bring some joy to the salaried (middle) class.
The funds provided for the agriculture sector(150000 crore) and MGNREGA (40000crore) will give some impetus to the rural economy but all these measures do not address the challenges different sectors of economy are facing at this crucial juncture. Lack of demand is the single biggest challenge the economy is confronted with, the govt needs to take some drastic steps to revive demand else all the measures it has taken to ease the supply side constraints in the past few days will be futile and the most obvious step one can imagine to revive demand is cut in Income Tax and reduction of GST rates, corporate rates etc .
The lockdown imposed by the Modi government has brought the aviation and the hospitality sector down to its knees and unless the govt bails the sector out this crisis, revival will be a distant dream also sectors like the logistics sector are bearing the brunt of the pandemic. Transport operators have no money to pay to the staff, give loan installments, vehicle insurance (motor insurance) and other fees. Some sectors are collapsing and some others are on the brink but the government’s indifference to the legitimate demands has rippled a strong wave of discontentment and despair .
Reforms on paper will neither make India into 5 trillion dollar economy nor will it become ‘ATMA-NIRBHAR’, mere lip service will not help concrete action with strong execution is the need of the hour .