Covid-19: All eyes on stimulus package as PM Modi extends lockdown till 3 May
With forecasters slashing India’s FY21 growth estimates amid soaring joblessness, a calibrated exit from lockdown and fiscal stimulus is the only hope
NEW DELHI : Prime Minister Narendra Modi extended sweeping nationwide curbs till 3 May to control the coronavirus outbreak, amid growing demand that the government swiftly announce a stimulus package to cushion the devastating economic impact of the lockdown on companies and people.
The government is also considering the benefits of partially resuming economic activity, including opening up certain sectors starting 20 April, to ease the hardships of daily wagers, farmers and small businesses.
Various forecasters have already sharply reduced estimates for India’s economic growth in 2020-21, with the latest from Barclays pegging it at zero. According to estimates by the Centre for Monitoring Indian Economy, joblessness soared to 23.4% in the week ending 5 April. A calibrated exit from the lockdown, along with a massive fiscal stimulus, is seen as critical to survive the severe blow from covid-19.
Though a zone-wise plan to ease the lockdown restrictions is expected to be released on Wednesday, India’s top business leaders said that a timely stimulus package will not only rescue thousands of businesses from collapsing but also save millions of jobs.
“We are happy to note the relaxation of restrictions in green zones and hope the government will also announce the economic stimulus package soon so that we can start focusing on rebuilding the economy. Saving lives and livelihood has to go hand in hand," Deepak Parekh, chairman of Housing Development Finance Corp. Ltd, India’s largest mortgage lender, said on Tuesday.
Modi’s administration faces the dismal choice of either having to push as many as 400 million workers in the informal sector deeper into poverty through an extended lockdown, or risk losing thousands of lives by letting the deadly virus spread unchecked.
The decision to extend the lockdown comes as infections have climbed steadily, despite strict stay-at-home rules over the past three weeks.
India has reported 11,275 coronavirus infections and 378 deaths as of 14 March, health ministry data showed.
Making a case for a rescue package for small businesses, Chandrajit Banerjee, director general of Confederation of Indian Industry said, “With limited resources, (they) do not have the capacity to withstand massive shocks like covid-19. The health of these companies have a bearing on the entire supply chain, including large corporates."
While economists and business leaders are seeking a ?9-10 trillion stimulus to support growth and employment, the government is nearly ready with a set of “interim" measures for sectors that are hit the hardest by the virus outbreak, according to a government official who spoke on condition of anonymity.
The government is expected to announce measures for small businesses as well as aviation, said the official.
“The interim measures will ensure that no payment or dues are pending from the government’s side. This will ensure there is no cash crunch," the official said, adding that the measures are likely to be announced this week and a possible larger economic stimulus once the lockdown is lifted.
The extension of the lockdown would squeeze the economy further but if the chain of transmission of the virus is broken, India would be in a better position for a quick rebound, said Sanjay Kirloskar, chairman and managing director, Kirloskar Brothers Ltd. “India is still seeing a growth in the number of the infected, which indicates that the worst is not over yet."
Pawan Goenka, managing director, Mahindra and Mahindra Ltd agreed. “It is up to all of us to ensure that the PM does not have to extend it further," he said.
What is needed at the moment is a set of survival measures, said former chief statistician of India Pronab Sen. “We have to think about two kinds of survival—one, of the people who have no money to buy food or medicines and the second, of enterprises. We need to keep both alive," said Sen.
As many as 40 million jobs are at risk during the April-September period. “Hence, an urgent relief package is critical," Sangita Reddy, president of Federation of Indian Chambers of Commerce and Industry, said in a statement after the PM’s address to the nation. Reddy said that a graded opening of the economy will help start some production activity to ensure that there are no shortages when the lockdown is lifted.