IN a bid to stimulate demand in a pandemic-wrecked economy, the finance minister Nirmala Sitharaman has announced a Rs 12,000 crore interest-free 50-year loan to states for spending on capital projects in a bid to boost the economy. She further announced a one-time Rs 10,000 interest-free festival advance to all its officers and employees as part of plans to increase consumer spending. Similarly the LTC Cash Voucher comes as a big incentive for central government employees. According to finance minister, the private sector spending through LTC tax benefit would be at least Rs 28,000 crore, so the total demand boost due to the new schemes is estimated to be more than Rs 1 lakh crore.
The economy needs a leg up at a time when the GDP has been in a freefall due to the ongoing Coronavirus pandemic. So, the economy needs government to come out with measures to trigger demand. Putting more cash in the hands of the employees is one smart way of doing it. But for the economy to recover faster, the government needs to spend more and also accelerate the work on the infrastructure projects.
Earlier in the initial phase of the pandemic, Prime Minister Narendra Modi announced a stimulus package of Rs 20 lakh crore to ease the devastating fallout on the economy of the Covid-19 crisis. The package comprised a facility of Rs 3 lakh crores collateral-free automatic loans for business, including micro, small and medium enterprise (MSMEs). This made borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover eligible. Loans have 4-year tenure with a moratorium of 12 months on principal repayment, Besides, there was 100 per cent credit guarantee cover to banks and NBFCs on principal and interest. This enabled 45 lakh MSME units to resume business activity and safeguard jobs. A large part of the package, around Rs 8.04 lakh crore, was the additional liquidity injected into the system by the Reserve Bank of India through various measures.
The package went a long way to cushion the impact of Covid-19. But it is also true millions have already lost jobs and a prolonged shutdown of the economy has only piled on the misery. While the fresh stimulus package will offer a further relief, for economy to get back on feet, the government has to open it more and more. Time has come to get around the pandemic and ensure that the fight against it and business activities go together.
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