PM Modi, Sitharaman to meet today to finalise second stimulus package

Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman will again meet on Friday to finalise a second stimulus package for industry, the poor, and farmers. 

An announcement is expected within the next 24-48 hours. Friday’s meeting follows a wide range of deliberations held within the government and with eminent experts. However, there may not be a “big-bang” stimulus package and the government thinking is to go for smaller, targeted announcements. 

Senior officials in the Prime Minister’s Office had a videoconference with those in the finance ministry, NITI Aayog, members of the Economic Advisory Council (EAC) to the Prime Minister, and independent experts. 

Those who are learnt to have participated in the meeting include former Reserve Bank of India (RBI) governor Urjit Patel, EAC Chairman Bibek Debroy, EAC Member Sajjid Chenoy, 15th Finance Commission Chairman N K Singh, and National Institute of Public Finance and Policy Director Rathin Roy. 

On the government’s side, those who attended included Cabinet Secretary Rajiv Gauba, Principal Secretary to PM PK Mishra, Economic Affairs Secretary Atanu Chakraborty, NITI Aayog Vice Chairman Rajiv Kumar, NITI Aayog Chief Executive Officer Amitabh Kant, Ratan Watal (also of the NITI Aayog), and Chief Economic Advisor Krishnamurthy Subramanian.

“We have got a lot of feedback from states and industry bodies from the ground and other stakeholders. There have been wide-ranging deliberations,” said a senior official.

The upcoming package will again be aimed at the urban and rural poor, including migrant labourers stuck away from their homes; other disadvantaged sections of society; micro, small and medium enterprises (MSMEs); and some of the worst-affected sectors. 

For industry, the aim will be to provide easier and cheaper access to credit, and could also mean the Centre pumping in more money into the credit guarantee fund trust for small and medium industries.

The measures being finalised could include easier access to credit for MSMEs and further cash and food transfers. There is a proposal for another hike in payments under the Mahatma Gandhi National Rural Employment Guarantee Scheme, and disbursements under the PM-Kisan scheme could be further expedited.

The upcoming package could be roughly similar in size to the Rs 1.7-trillion stimulus announced by Sitharaman in late March. That package was around 0.8 per cent of GDP, much smaller than the ones of most other G-20 nations. 

The US’ stimulus package was pegged at 11 per cent of GDP, Australia’s at 9.7 per cent, and Brazil’s at 3.5 per cent, according to data portal Statista.

Chambers like Assocham and Ficci have been asking for big bang packages, ranging from Rs 9 trillion to Rs 23 trillion.

Last week, the government allowed economic and industrial activity to resume in rural areas, where harvesting for rabi crops has begun. This has been done primarily with the intention of “rural and agricultural development and job creation”.

Prohibition will not be entirely lifted in commercial and manufacturing but production units in rural areas, industrial estates, and export zones can reopen if workers stay on their premises or nearby.