Measures collectively taken by Govt and RBI amounts to 5% of GDP: Gopal Agarwal

Amid concerns over uncertainty and delay in announcing a substantial stimulus package to boost the country’s economy and businesses, the Bharatiya Janata Party’s spokesperson for economic affairs Gopal Krishna Agarwal said that the various fiscal and monetary measures announced so far by the government and Reserve Bank of India (RBI) amount to almost 5 per cent of gross domestic product or GDP.

“If one takes all the measures that the government and RBI together have announced till now, it would be about 5 per cent of GDP. There is some confusion over the quantum and it seems that the package is not substantial only because these measures have not been announced together,” Agarwal said, adding that the situation is being continuously monitored. He said that the government is ready to take more steps as and when required depending on the specific needs of the industry.

However, the direct fiscal package announced by the US stands at $2.3 trillion—over 10 per cent of its GDP while Japans package amounts to 20 per cent of the country's GDP. Germany has carved out $170 billion. Singapore has come up with a $41.7-billion stimulus package. India’s direct fiscal package, excluding the monetary measures, stands at $24 billion.

“Once the economic activities are opened up, it will be easier for the government to understand what immediate steps are required for handholding. Those measures would be taken,” Agarwal assured.

Last month, Finance Minister Nirmala Sitharaman announced Rs 1.7 lakh crore—about 0.8 per cent of GDP—relief package under the Pradhan Mantri Garib Kalyan Yojana for the country’s poor and vulnerable.

The RBI, additionally, has come up with a host of measures to stabilize the financial markets, besides providing the required liquidity into the system. It has reduced both the repo rate—rate at which banks borrow from the central bank—and the reverse repo rate—the rate at which RBI borrows from commercial banks.

The first set of actions taken by the RBI on March 27, including reduction in the repo rate and the cash reserve ratio, led to the injection of an additional Rs 3.74 lakh crore—about 2 per cent of GDP.

Earlier this month, it announced more measures unlocking Rs 50,000 crore, while providing another Rs 50,000 crore to refinance to financial institutions of which Rs 25,000 crore is directed to Nabard, Rs 15,000 crore to Sidbi, and Rs 10,000 crore to the National Housing Bank. RBI Governor Shaktikanta Das hinted that there was enough room for a further rate cut; the move would be taken as and when required.

Many think tanks and rating agencies have slashed India’s economic growth projections because of the coronavirus. Rating agency ICRA reduced India’s FY21 growth forecast between (-)1 per cent and 1 per cent, while it said that GDP could contract by 10-15 per cent in the first quarter. The International Monetary Fund pegged India’s growth rate at 1.9 per cent..