New stimulus measures unveiled by Finance Minister Nirmala Sitharaman on Sunday will cost Rs 40,000 crore, taking the actual fiscal impact of all the steps announced over the past few days to Rs 1.50 lakh crore or 0.75 per cent of the GDP, a report said.
Prime Minister Narendra Modi had announced a relief package of Rs 20 lakh crore or about 10 per cent or GDP last week. However, many of the measures unveiled have been in the form of moves like loan guarantees which do not entail an immediate fiscal cost. Earlier on Sunday, Sitharaman announced the fifth and final tranche of the government's stimulus package to revive the coronavirus-hit economy. She said the stimulus package includes the Rs 8.01 lakh crore of liquidity being made available by the RBI.
"We estimate that the actual fiscal impact on the budget will be only Rs 1.5 lakh crore (0.75 per cent of GDP), based on our calculations and assumptions made during the series of announcements," Barclays' Chief India Economist Rahul Bajoria said. The Centre will be able to keep its fiscal deficit at 6 per cent of GDP for FY21 after implementing the stimulus announcements, as against the budgeted 3.5 per cent, he said. The only measure with a fiscal impact among those announced on Sunday was a Rs 40,000 crore hit due to the moves on upping the works to be carried out under the employee guarantee scheme, Bajoria said in a note. The other move to allow bond raising activities by states up to 5 per cent of the respective GSDP will lead to additional issuances of Rs 4.28 lakh crore.
"This increase is linked to states adhering to material reforms in public distribution systems, ease of doing business, power distribution and urban body revenue sharing," it said. The states' increase in borrowing will be the same as the one announced by the Centre a fortnight ago, it added.
However, the consolidated fiscal deficit, which includes both the Centre and states, will rise to 12 per cent of GDP as against the earlier expectation of 8 per cent. Apart from this, there is a possibility that states may resort to off balance sheet borrowings to reduce their fiscal deficit of up to 1 per cent of the national GDP, it said.
The overall borrowings by the states and Central government combined will be Rs 25 lakh crore, it added. Among the stimulus moves announced over the last few days, the largest allocation from an actual fiscal impact perspective is the Rs 40,000 crore towards employment guarantee programme, followed by Rs 30,000 crore in special liquidity scheme announced last week and Rs 20,000 crore on the fisheries sector, it said.
The smallest move from a fiscal impact is Rs 500 crore allocation to the bee-keeping sector, Barclays said.
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