After the announcement of the three Covid-19 packages (until Thursday), the direct fiscal hit is only 0.6 per cent of the GDP or about ₹1.29 lakh crore, according to State Bank of India’s economic research report Ecowrap.
Of the total ₹3.16-lakh-crore stimulus announced on Thursday, the report assessed that the total cash outlay for the government will be only around ₹14,500-14,750 crore, with loans and liquidity accounting for the rest.
The impact of the third package on fiscal deficit is expected to be a miniscule 0.07 per cent of the GDP, it added. “Thus, we believe the fiscal deficit is likely to come around ₹16 lakh crore (8 per cent of the revised estimates of the GDP) in FY21 owing to lower revenues and higher expenditure against the backdrop of the Covid-19 pandemic,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
The budget estimate for fiscal deficit for FY21 was ₹8 lakh crore or 3.5 per cent of GDP.
Under the overall ₹20-lakh-crore package, the first package (announced on March 26) involved cash and food support; the second sought to give support to micro, small and medium enterprises (MSMEs), self-employed and non-banking finance companies; and the third provided support to the poor, including migrants, street vendors and farmers.
The report observed that the third package envisages banks undertaking a special drive to cover 2.5-crore new farmers under PM-Kisan through the Kisan Credit Card (KCC) scheme. The scheme will ensure credit flow of ₹2 lakh crore. Emphasising that street vendors are the most affected segment of the society due to Covid-19, the report said their livelihood has been crushed due to the lockdown, which is eating up their savings.
Credit for street vendors
Against this background, the government has announced that it will launch a special scheme within a month to facilitate easy access to credit (up to ₹10,000) to street vendors so that they will be able to set up their businesses again.
The government has estimated that this will support around 50 lakh street vendors and, hence, will offer liquidity of ₹5,000 crore.
“We estimate the State-wise break-up of street vendors from Periodic Labour Force Survey data (using share of self-employed in non-agriculture sector) and found that the top ten states accounted for around 35-lakh street vendors with Uttar Pradesh taking the lead with 7.8-lakh vendors, followed by West Bengal at 5.5 lakh vendors,” said Ghosh. Further, the government will also incentivise vendors who make digital payments and have good repayment behaviour through monetary rewards and enhanced working capital credit.
According to the report, the recent crisis has shown how important it is for a huge country like India to have an infrastructure that promotes inter-operability between the States and Centre.
The mission mode implementation of “One Nation One Ration Card” is a step in the right direction. So is making available the portability of welfare benefits for migrant workers and those having no ration card, it added.