A Ballooning Booster Dose

We already have exercised lockdown for more than one and half month and are in a mammoth trouble in marathon of survival and revival. In earlier article I have expressed my ambiguity on understanding the near exact extent of trade off between lockdown and normalcy. To limp back to normalcy a booster was highly needed from the part of the government and finally we are blessed to hear the announcement. 
On Tuesday, as usual in a shock and awe style, the Prime Minister of our country announced the grand economic package of Rs 20 lakh crore (figured as 10 % of GDP) as a measure to cushion the shock of Coivid-19. And day after Union Finance Minister Nirmala Sitharaman has given specification on the package which subsumes previous measures. The package includes liquidity infusion by RBI in phases since February and Rs 1.7 lakh crore package announced by Ms Sitharaman on March 27. 

On that day RBI also announced measures to inject more liquidity into the system to the tune of Rs 3.75 lakh crore. On April 17 and 27 the apex financial institution infused more and more liquidity. Altogether the figure stands at Rs 9.75 lakh crore and the rest amount Rs 10.25 lakh crore is thus the fresh proposal little over 5% of GDP announced by PM. 
Meanwhile on May 9 the Union government has revised up its 2020-21 borrowing limit by 53.58% to Rs 12 lakh crore from the earlier estimated figure of Rs 7.8 lakh crore to give a sizeable strength to the fiscal capacity. The economic package therefore demand money from borrowing, which is threatening to the credit standing of the country, and putting more printed money in circulation, which is inflationary in concern but could negotiate with the higher rate of unemployment problem currently country is suffering from (a reference from Phillips Curve analysis on Inflation and Unemployment). The package involves a very small fraction of fresh money as the rest already provisioned in Rs 30 lakh crore worth Union Budget in February. Though I can’t deny that the focal point of the package was MSME which for long was bearing the brunt of demonetisation and GST and for the time being has been proved to be the best option to substantiate the view of self-reliance (simply buy and promote local) the PM called for in his last address to nation. 
Being constantly censured by oppositions today the Union government has unveiled some survival measures for migrants and marginal communities like free food for migrants, affordable housing, special credit facility for street vendors and other announcements. Very eagerly now we are waiting to see how far it is going to be translated into reality denying the appetite of interest pockets.
Now let me point out some concerns of implementation of whatever has been announced so far and its impact on real life. For long we have experienced that whenever it comes to the context of extending credit to any sector for its survival the banking system finally being costed and an unwanted NPA has been a constant pain to this sector. 
The effort to streamline the production activity of firms across board beyond announcements needs some security initiatives like biggest conglomerates are already planning like employees health hygiene maintenance through a separate specialised wing which involves a new cost in the account ledger of firms. And this may not be a suitable accommodative stance for marginal players who are going to start with some extra support from part of the government. Also this may be a critical concern of inflation either or low interest coverage ratio (IC ration) of firms to negotiate with their future liabilities. 
This apart a very simple side of the story I want to mention that people who are employees of small firms have to bear extra cost for their transports, health hygiene etc to get into their work place again which may be burgeoning to the cost of their livelihood and will cause to cripple the domestic demand and household savings in macro sense. And taking this cue the revival strategy of pushing the supply side of the economy in near future may face a downfall in demand which is not a good concern at all for making country self-reliant. So here I am waiting for a comprehensive social security policy from the government, obviously not the way states like UP, MP and Gujarat already has unveiled labour laws reforms, so as to reap the actual benefit otherwise it will be reflected to a bigger liability for the nation. 
Taking other important case and must not be forgotten amid the ‘Big Booster’ analysis that how far general people are confident enough with health and vigour to be a participant of this event avoiding the number of Covid-19 cases alarmingly increasing everyday.
We, Aam Aadmi of the country, are waiting for a balanced policy which will give passage to all to be a Democratic participant and to make development an enjoyable fruit for all.
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2 comments:

  1. So true burning issue and your expertise writing light a fire under this circumstances..

    ReplyDelete
  2. Thank u for your valuable comment

    ReplyDelete