Modi announces $265 bil. rescue package, bold reforms for India hailed
By Atul Ranjan
NEW DELHI, NNA - Prime Minister Narendra Modi on Tuesday announced a comprehensive economic package worth 20 trillion rupees ($265 billion) to help revive the economy hit by the damaging fallout from the ongoing Covid-19 pandemic.
The sizeable stimulus is remarkably equivalent to 10 percent of the country’s gross domestic product.
Modi said it was imperative for India to turn a crisis into an opportunity to move forward as he made a clarion call for creating a self-reliant nation with a new set of bold reforms.
Dubbed 'Atmanirbhar Bharat Abhiyan' or Self-reliant India Campaign by Modi, he said in a televised address that the stimulus and reforms have been designed to help all classes and bring a quantum leap to the economy which was also devastated by the necessary lockdowns to contain the spread of the deadly coronavirus outbreak.
While details of the package would be revealed soon in a follow-up announcement by the finance minister, Modi gave a broad picture of how it would benefit all segments, from the farmers, laborers, migrant workers and middle-class to MSMEs (Micro, Small & Medium Enterprises), cottage and big industries, organized and unorganized sectors.
Apart from bold reforms for land and farming, an efficient workforce, a strong financial system, a rational taxation, legal frameworks, the government would strengthen five pillars, namely the economy, infrastructure, a tech-driven system, demography and demand in the rebuilding of India, he said.
The prime minister said the package, which included recently announced measures of the Reserve Bank of India, was necessary to give a strong impetus to the development of the country, from the creation of a vibrant workforce to power a self-reliant India to boosting supply to meet rising demand of a growing nation.
There would also be reforms to attract more investments into the country, and interestingly, Modi noted that self-reliance would help prepare the country “for tough competition in the global supply chain”.
It comes at a time when calls to shift the supply chain away from China are getting louder in many countries including India where some states had recently announced major changes in labor laws to attract companies looking to shift manufacturing bases.
“It is important that the country wins this competition. The same has been kept in mind while preparing the package,” Modi said, while clarifying that self-reliance would not mean self-centric as India would want to prosper in partnership with the world.
Welcoming the bold moves that the country would make, the Federation of Indian Chambers of Commerce and Industry (FICCI) said it was high time that India dreamed big.
“What this package does is, it strengthens the dream of a strong India. It’s a good step,” FICCI president Sangita Reddy said in a statement.
Suman Chowdhury, chief analytical officer at Acuité Ratings & Research Ltd., said reforms would pave the way for big spending and investments by the public and private sectors but he was also concerned about the impact of huge financing.
Large government borrowings from any sources would have implications not just on fiscal position but on other macro indicators like inflation too.
“Acuité, nevertheless, believes that the announcement goes beyond a particular stimulus amount and reflects the government's intent to alter the economic narrative through substantial reforms that will facilitate large scale private and public sector investments,” Chowdhury said.
Rajan Wadhera, president of the Society of Indian Automobile Manufacturers (SIAM), said that he was hopeful that a focused package to support the crisis-hit Indian automotive industry would be announced by the finance minister soon.
He pointed out that the Indian automotive industry as a strong pillar of the economy makes huge contributions to the GDP and employment in a highly-indigenized supply chain.
According to the World Bank’s report on April 12, the global economic fallout triggered by the coronavirus pandemic is expected to knock down India’s GDP to between 1.5 and 2.8 percent for the current year ending March 2021.