Govt's fiscal cost could be less than 11% of total economic package

Out of nearly Rs 21 trillion worth of Atmanirbhar Bharat measures announced by the finance ministry and the Reserve Bank of India, the Centre’s fiscal impact will amount to around Rs 2.28 trillion, or around 10.8 per cent of the total package, Business Standard has learnt from senior government sources.

This will include tax revenue foregone, outlay towards free food distribution and cash handouts, increase in MGNREGA, interest subvention, increase in viability gap funding for social infrastructure, and initial support from the Centre’s coffers to kickstart some of the liquidity and credit measures announced over the past five days.

Not all of this amount will necessarily be borne in fiscal year 2020-21. A portion of the burden will be funded from the Centre’s Budget over the next two-five fiscal years.

On Sunday, the Finance Minister Nirmala Sitharaman gave the break-up of all Covid-19-related stimulus packages announced. In that, she included the Centre’s health sector package worth Rs 15,000 crore, and Rs 8 trillion worth of support from the Reserve Bank of India. She also said the tax concessions announced since March 22 had cost the exchequer Rs 7,800 crore.

 

 

As part of the March 26 package of Rs 1.7 trillion, the FM announced measures regarding free foodgrain distribution to 800 million people, one-time cash transfer to senior citizens, women and divyangs, and free gas cylinders for three months to Ujjwala beneficiaries. All this is expected to cost around Rs 92,000 crore.

On May 13, the FM announce measures worth Rs 5.94 trillion, to provide relief to MSMEs, taxpayers, NBFCs, power distribution companies, real estate sector, organised sector employees, and contractors. Most of these were on the liquidity and credit side. Analysts differ on the direct fiscal impact of this set, with estimates ranging from Rs 19,800-41,000 crore. A top government official clarified that the outlay from Wednesday’s measures will be around Rs 35,000 crore, including some initial support from the Centre to boost the liquidity measures announced. These may be spread out over multiple years.

On May 14, the FM’s measures totalled Rs 3.1 trillion. The direct spending will include Rs 3,500 crore on providing free foodgrain to 80 million migrants for two months, Rs 1,500 crore interest subvention on MUDRA loans below Rs 50,000 crore, and Rs 5,000 crore on supporting credit-linked subsidy scheme for middle income groups to enable them to buy affordable housing. The last point was not mentioned by Sitharaman.
 

The May 15’s announcements focused on the rural and agriculture sector and totalled Rs 1.5 trillion. Around Rs 35,000 is expected to come from the Centre’s Budget over the next two-five fiscal years on schemes such as formalisation of micro food enterprises, matsaya sampada yojana, promotion of herbal cultivation beekeeping initiatives, and others.

Out of May 16’s announcements, which analysts estimate totalled around Rs 63,000 crore, about Rs 8,100 crore will be towards increased viability gap funding for social infrastructure projects like hospitals and schools. 

Sitharaman also increased MGNREGA allocation for 2020-21 by Rs 40,000 crore, taking the total outlay for the year on the employment guarantee programme to over Rs 1 trillion.