Stimulus 2.0 announced by Finance Minister Nirmala Sitharaman on Sunday will cost Rs 40,000 crore, taking the actual fiscal burden to Rs 1.50 lakh crore or 0.75 per cent of the GDP, a report said.
Prime Minister Narendra Modi had announced a relief package of Rs 20 lakh crore or about 10 percent or GDP last week while addressing the nation. However, many of the measures unveiled durimg the announcement are in the form of moves like loan guarantees which do not have any immediate fiscal cost.
Earlier on Sunday, Sitharaman announced the final tranche of the centre’s stimulus package to revive the Covid-19 hit economy. She stated that the stimulus package comprises of Rs 8.01 lakh crore of liquidity being made available by the RBI.
“We estimate that the actual fiscal impact on the budget will be only Rs 1.5 lakh crore (0.75 per cent of GDP), based on our calculations and assumptions made during the series of announcements,” Barclays’ Chief India Economist Rahul Bajoria said.
The Centre will be able to keep its fiscal deficit at 6 percent of GDP for FY21 post the implementation of the stimulus announcements, as against the budgeted 3.5 per cent, said Bajoria.
The only measure with a fiscal impact among those announced on Sunday was a Rs 40,000 crore hit due to the moves on upping the works to be carried out under the employee guarantee scheme, Bajoria said in a note.
The other move for permitting bond raising activities by states up to 5 percent of the respective GSDP will cost additional issuances of Rs 4.28 lakh crore.
“This increase is linked to states adhering to material reforms in public distribution systems, ease of doing business, power distribution and urban body revenue sharing,” it said.
However, the states’ increase in borrowing will remain the same as the one announced by the Centre a fortnight ago, it added.
However, the consolidated fiscal deficit, that includes both the Centre and states, will inflate to 12 percent of GDP as against the previous expectation of 8 percent.
Apart from this, there is a prospect that states may resort to off balance sheet borrowings for reducing their fiscal deficit of up to 1 percent of the national GDP, it said.
The total borrowings by the states and Central government jointly will be Rs 25 lakh crore, it added.
Among the stimulus measures announced over the last few days, the highest allocation from an actual fiscal impact perspective is the Rs 40,000 crore pertaining to employment guarantee programme, followed by Rs 30,000 crore in special liquidity scheme announced last week and Rs 20,000 crore on the fisheries sector, it said.
The lowest allocation from a fiscal impact is Rs 500 crore allocation to the bee-keeping sector, Barclays said.