As the number of coronavirus cases in India rose above 500, the delay in announcement of a concrete and well thought-out economic stimulus package to boost growth and protect jobs is adding to uncertainty and panic. While Prime Minister Narendra Modi addressed the nation at 8 p.m. on Tuesday, he did not mention anything about an economic package. Instead, he announced extension of the lockdown mode to 21 days. Even as India has limited fiscal space for a huge stimulus, it has to carve out a package which is effective and helps in protecting businesses, even if that means that the government has to deviate from its path of fiscal consolidation.
The US has already announced a $2-trillion stimulus package to combat the economic impact of the spread of the deadly COVID-19. Beside the US, Australia, Italy, Germany, Switzerland, France, UK, Spain, Thailand, Indonesia, and others have already announced fiscal packages to arrest the economic slowdown. Australia has announced $11.4 billion, while Italy, which has seen the highest number of deaths from coronavirus, has committed $28 billion.
Finance Minister Nirmala Sitharaman announced a host of measures related to statutory compliance but fell short of coming out with an economic package, though she said that it was in the works. The Prime Minister’s silence on the stimulus package has left the Indian stock market confused and many others guessing about their future.
Though the Centre issued an advisory asking India Inc not to resort to retrenchment or wage cuts, especially for those who are on contract labor, many fear massive job loss in the unorganized sector. With a three-week lockdown, thousands of daily wage earners have left the cities. The unemployment rate, especially in the rural areas, is set to rise exponentially as uncertainties linger with no stimulus package on the table yet.
Over 75 per cent of the labor force is engaged in the micro, small and medium sector, largely categorized as the unorganized sector.
Delay in announcing the stimulus package could lead to a huge cost for India. The government must make the big announcement and not resort to chalking out and putting in place piecemeal measures to help businesses..
