Announce the stimulus, now – analysis
37 days have passed since the national closure. In addition to the first announcement, on March 27, of a ₹ 1.7 lakh crore package to provide what were rather minimal relief measures for the poor, the Center has yet to present a package for the economy. Prime Minister Narendra Modi, in one of his first speeches to the nation about the coronavirus pandemic, spoke of creating a high-level economic task force to suggest action, but little has been heard from him since. There are indications that the government is working on a stimulus. In addition to the fact that this has already been delayed, reports suggest that it is primarily focused on micro, small and medium-sized enterprises (MSMEs).
There is no doubt that MSMEs have been severely affected due to the blockade. They have little financial buffer; they employ the majority of India’s workforce; and they need urgent help. But it will be a mistake if the government only focuses on them and ignores the demands of the largest industrial bodies that have sought a more comprehensive package. Given India’s socialist past, there is a tendency to view large companies with suspicion. But as the decades after economic reforms have shown, these businesses are critical. They provide massive employment, both in manufacturing and services; they are at the forefront of innovation; they can embark on larger projects that are critical to infrastructure needs; and their contribution to the income basket is key to fiscal health.
The blockade has affected all sectors, small and large. Given the complex interrelationships of supply that exist between all segments of the economy, helping one part while neglecting another will not be enough. The expected collapse in demand will also affect all industries. So it is crucial that when the government announces its package, it takes into account all industrial activity. Announce the stimulus now, with an eye on all the moving parts of the economy.