Just 36 hours after the 21-Day lockdown was announced, the government unveiled a slew of measures to support the underprivileged section of the society to the tune of Rs 1.7 lakh cr, but experts feel that the second round of package for the industry could be in the offing.
COVID-19 outbreak across the world has disrupted economic activity across the world. The relief package is just one of the measures which the government has deployed to cushion the economic impact, but it may not be enough, fear experts.
Apart from the package which was announced on Thursday, there is a desperate need to support industries like manufacturing, tourism, aviation as well as automobiles. The total cost of the stimulus, including the one which was announced on Thursday, could well be in the range of 1-2 percent of GDP, suggest experts.
The Rs 1.7 lakh cr relief package announced under the ‘Gareeb Kalyan Scheme’ is targeted at the most vulnerable sections of the society to support them with food as well as direct cash transfers as the economy takes a halt in the 21-Days lockdown for a period of 3-months.
“Comprehensive package for the poor and vulnerable. The focus is "nobody should go hungry.” No announcements for stimulating the economy. Perhaps later. This is a package for lockdown impacted segments,” Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services told Moneycontrol.
“Regarding relief to MSMEs etc the FM said "we will look into it. " So industry-specific measures likely to be announced in the next package. The govt is prioritising. This can go a long way in implementing the lockdown,” he said.
Experts feel that the next round of packages could be for the industry and especially for the sectors such as banks, consumption, hospitality, auto, durables, agriculture, and healthcare.
“A package from the government has to address three broad areas (1) protecting livelihoods, (2) protecting businesses, and (3) strengthening the healthcare infrastructure for COVID-19. To this end, the government needs to provide for viability of businesses and employees which will be at the highest risk from social distancing and lockdown such as hotel, restaurants, transport, entertainment, etc.,” Suvodeep Rakshit, Vice President & Sr. Economist, Kotak Institutional Equities told Moneycontrol.
“The support to these segments could be in the form of cheap credit lines, regulatory/financial forbearance, tax benefits, direct cash transfers, and income supports,” he said.
Rakshit further added that while the cost will depend on the extent and depth of the program as well as the expected time period of a hard lockdown, we pencil in around 2.0-2.5% of GDP as the probable stimulus size that the government may have to look at.
We spoke to various experts on expectations of the package which could be announced for the industry. Here’s what they have to say:
Expert: Vinod Nair, Head of Research at Geojit Financial Services
The package should have direct cash transfer to daily workers, unorganized and farm sectors. The idea should be to restrict job losses in the country, and provide relief to the highly hit sectors and encourage the health segment to handle the COVID-19 issue.Ease measures is also expected for Banks to manage the risk of an increase in NPA. The size of the package could be about 1% of India’s GDP which could be about $30bn, Rs2trn in INR.
Expert: Asutosh Mishra, Head of Research - Institutional Equity, Ashika Stock Broking
We expect stimulus package to primarily address income loss of urban workforce by giving direct cash transfer, free gas cylinders, interest subvention on selected personal loans and higher spending on the healthcare and pharma sector.
Apart from that, we expect a comprehensive package for airlines, hospitality, tourism sectors and export segments, which are worst impacted by the COVID-19 outbreak. Given the level of disruption, we expect a package to be approx 1-1.5% of the nominal GDP.
Expert: Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor
We need to spend money on medical supplies, ventilators, masks and getting protective equipment for medical workers quickly. People are going to lose jobs not only in rural areas but in urban areas also.
In terms of sectors, the government should provide stimulus package for the most impacted ones like Hotels & Hospitality, Tourism, Aviation, Automobile, as these are major employment contributing sectors for the Indian economy and these are some of the worst-affected sectors due to travel bans, social distancing, and suspension of business activities.
As these sectors are having huge debts as well so a loan restructuring scheme could be announced. Apart from this government may allow them for delayed bills payments. License renewal expansion could also be the kind of Stimulus package.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.