The pandemic has disrupted Indian economy and resulted in loss of livelihoods, instilled fear among the business sector and contraction of demand. Most economic activity has come to a pause after the government imposed nationwide lockdown to control the spread of this pandemic. Lockdown has led to approx 12.2 crore people losing jobs and consumer demand evaporating. PM has focused on the point that states will always have a greater say in terms of the lockdown depending upon the scenario. As we know that Covid 19 is taking a huge shape in different states, lockdown 4.0 announced by the Prime Minister has a major role to play in terms of social distancing and safety measures.

The recent economic stimulus by the government stands up to roughly 10 percent of the GDP, which is very substantial compared to the US and Japan being 13 and 21 percent of the GDP respectively. The mega Rs 20 lakh crore package had specific announcements made in five installments by the Finance Minister. It tried to ensure that migrants do not face unemployment amid the lockdown.

The Centre has increased the borrowing limit of states from 3 percent to 5 percent of GDP for 2020-21.

The first tranche supported MSMEs that were hit majorly by the lockdown. The second tranche looked into reviving migrant workers, small farmers and street vendors. The third tranche focused on the agricultural sector whereas the fourth one included a set of reforms for minerals, coal, defence production, power distribution, civil aviation and space.

The interventions also include tax breaks for small businesses and incentives for domestic manufacturing and helping the companies in the brink of bankruptcy with revenues and cash flows. The package also includes free food grains to poor and cash to poor women and elderly, RBI’s interest rate cuts and liquidity measures. The special economic package was announced to make India self reliant. The focus will be on various sections like MSMEs, migrant laborers, agriculture & allied activities, infrastructure and public health. The government’s primary objective of the package has been to give more fiscal space to the states, accelerate public infrastructure, and improve the ease of doing business. The reforms undertaken are welcome but the immediate crisis faced by weaker sections of the population cannot be ignored. The government has utilized the crisis to implement certain structural reforms which is beneficial in the long run but a delayed policy response during the lockdown period might cost a huge loss of income and push more people into poverty.

Written by

Sayan Chowdhury, Intern

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