Aatmanirbhar Bharat a step in the right direction but not a consumption trigger, says CRISIL

The Finance Minister and RBI’s measures extending financial support through the ₹20.9-lakh crore stimulus package Aatmanirbhar Bharat, is a step in the right direction but is not likely to be a consumption trigger, according to CRISIL.

The research and rating firm says that with the five tranches of stimulus measures worth ₹11 lakh crore and ₹9.9-lakh crore RBI liquidity support, together, the financial support for Coronavirus pandemic relief works out to ₹20.9 lakh crore.

While most steps are in the right direction, CRISIL says it is unlikely to stimulate demand/consumption, given that the package is more focussed on supply-side reforms.

Implementation by States is key

It states, “Given the fiscal constraints, the government has undertaken measures that can magnify the impact of every rupee of stimulus. Hence the liberal use of guarantees and tiered funding structures. This is reflected in the actual committed fiscal outgo of ₹1 lakh crore, translating to a meagre 9 per cent of the ₹11 lakh crore of measures outlined over the five tranches. The bulk of this direct support would be through the Pradhan Mantri Garib Kisan Yojana.”

The government has also taken forward some earlier discussed structural reforms, especially in tranches 4 and 5, to help drive India’s medium-term growth story. The announcements pertain especially to sectors such as mining, aviation, urban infrastructure, power, and agriculture.

The government has increased the borrowing limit for State governments from 3 per cent of their gross domestic product (GDP) to 5 per cent of GDP. However, of this additional 2 percentage points, 1.5 percentage point is conditional upon States achieving certain targets. The key monitorable now would be how States enable the implementation of various schemes and measures and work in close partnership with the Centre.

Less for highly vulnerable sectors

To address near-term issues, apart from direct benefit transfers and additional spending through MNREGA, the government has mobilised credit to micro, small and medium enterprises (MSMEs), agriculture, and the affordable housing sector.

The 100 per cent guarantee on ₹3 lakh crore loans to MSMEs with one-year moratorium, for instance, will help these units, which are typically strapped for working capital. It will also spur credit growth for both banks and non-banks this fiscal and contain delinquencies in the segment, which would have increased otherwise.

The relaxation of insolvency norms should help companies in the near term as they will be protected from liquidation arising out of the Covid-19 environment.

CRISIL says there were no clear announcements for highly vulnerable sectors such as airlines, tourism and hotels, barring the additional lending for MSMEs in the space, or to improve the sentiment of the workforce, both organised and unorganised.

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