Analyze PM Modi's Economic Package Amidst COVID-19: A Common Man's Perspective

The economic package announced by Prime Minister Narendra Modi has been a topic of discussion among policymakers, economists, and the general public. While the package appears promising, it is essential to understand the details and implications of such measures in the ongoing pandemic context.

An Overview of the Economic Package

The economic package was divided into five tranches with a total amount of 5,945.5 billion rupees. Here’s a breakdown of the package:

Tranche 1 – 594,550 crore rupees, including 3 lakh crore for business capital facilities, 20,000 crore for stressed MSMEs, and 2,800 crore for EPF support. The package also included 6,750 crore for EPF reduction, and 30,000 crore for NBFC/HFC/MGIs, and 90,000 crore for discoms, along with 50,000 crore for TDS/TCS. Tranche 2 – 310,000 crore rupees, allocated for grain supply for migrant workers, Mudra Sishu loans, housing, and Kisan Credit Scheme. Tranche 3 – 150,000 crore rupees for micro, small, and medium food enterprises (MSMEs), PM Matsya Sampada Yojana, agriculture infrastructure, and herbal and beekeeping initiatives. Tranche 4 – 48,100 crore rupees for viability gap funding and additional MGNREGA allocation.

The total combined amount from these measures, along with existing measures like PM Garib Kalyan Package (192,800 crore) and RBI measures (801,603 crore), adds up to 20,97,053 crore or 10% of GDP.

Analysis and Perspectives

The effectiveness of the economic package is a subject of widespread discussion. Various stakeholders, including government officials, rating agencies, and experts, have provided differing opinions on the impact of this stimulus package.

Official Government View: The government has lauded the package, emphasizing its aim to support various sectors and promote long-term growth.

Analysts and Rating Agencies: Different rating agencies like Goldman Sachs, Kotak, and SBI have projected the package to contribute 1% to GDP. Fitch Ratings, however, has expressed skepticism, suggesting that the measures may not significantly aid the economy. Moody's, on the other hand, has been more optimistic, anticipating improvement.

RBI View: The Reserve Bank of India (RBI) has stated that the package will contribute around 4% to the GDP. This perception is deemed the most accurate due to the RBI’s better understanding of the economic landscape.

SBI Expert: Former Chief Economist SK Ghosh of SBI has estimated the impact to be 1% of GDP.

Economic Commentators: RRR, a well-known economist, has expressed a sentiment that the figures declared are insufficient.

Opposition View: The opposition has been critical, labeling the package as a mere superficial measure.

My View: All perspectives are valid owing to the ongoing pandemic and its uncertain effects on the economy. The government is focusing on both short-term relief and long-term requirements for the country's development.

Conclusion

While the package aims to address immediate financial needs, it is crucial to note that there are no free lunches. The money comes from our taxes and will eventually be recovered from us. The success of these measures depends on the performance of financial institutions and stringent institutional checks to ensure effective distribution and utilization of funds.

We must watch closely as these packages are routed through banks and NABARD to ensure they achieve the desired outcomes. The ultimate success of such economic measures lies in the ability of the banks and relevant institutions to perform effectively.