Nirmala Sitharaman to explain Modi’s Rs 20 lakh cr economic package; here’s what to expect in details

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Updated: May 13, 2020 2:45 PM

The new economic stimulus and reform package is likely to prioritise sectors where there is a large domestic market and generate significant employment.

finance minister nirmala sitharaman, FM sitharaman press conference, economic package 2.0, Rs 20 lakh croreCredit or loan guarantees to certain sectors could be a welcome move as smooth credit flow to SMEs require government-backed loan guarantees to banks who lend to SMEs.

As India eagerly awaits for Finance Minister Nirmala Sitharaman’s address to get clarification on how the mega economic package will help various sectors of the economy, speculations and expectations have flooded the streets. The Rs 20 lakh crore economic package 2.0 announced by Prime Minister Narendra Modi yesterday is said to be aimed at all the sections of the society. The new economic stimulus and reform package is likely to prioritise sectors where there is a large domestic market and generate significant employment, said Arindam Guha, Partner, Lead – Government and Public Services, Deloitte India. The package is most likely to leverage financial instruments like credit guarantees etc. so that the country’s fiscal situation is also factored in, he added. Significant reforms impacting all stages of the value chain of these sectors from farm to consumer with the end objective of increasing ease of doing business is expected, he further said.

With recent announcements related to agriculture and labour reforms, it is also expected that the manufacturing and the agriculture sector may receive a big boost from the government. The regulatory changes should be designed to encourage entrepreneurial spirit, the industrialist mindset to build a new India, as manufacturing and jobs move to India, said N Venkatram, CEO, Deloitte India. The establishment of a food processing industry in itself will, for example, have great potential for export and will also be a big boost to our agriculture sector, reducing the tribulations of migrant labour, N Venkatram added.

Also Read: PM Modi’s Rs 20 lakh cr economic package: How much of it is already done, and how much is new spend

With a focus on the roadmap to spend the remaining part of the Rs 20 lakh crore economic package, experts also expect credit or loan guarantees to certain sectors. Credit or loan guarantees to certain sectors could be a welcome move as smooth credit flow to SMEs require government-backed loan guarantees to banks who lend to SMEs, said Madhavi Arora, Economist, Edelweiss. She added that the RBI may also consider creating a special purpose vehicle (SPV) that could focus on purchasing corporate bonds and deepen the credit market liquidity and price discovery.

Watch: PM Modi’s Rs 20 lakh crore package more than expected; India reforms best during crisis
 

Among other expectations, there are possible income support for the unemployed; more market liquidity support lines from the RBI in the coming months; and more medium-term factor- productivity enhancing or infrastructure-related reforms. 

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