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The next round of government stimulus will focus on middle-income group, micro, small and medium enterprises (MSMEs) and some services sector. However, there may not be any direct cash support to individuals.
“Many suggestions are there. Urban and rural middle class, along with MSMEs, would be in focus,” a senior government official told BusinessLine . However, direct cash support such as cash transfer to women, senior citizens or farmers is unlikely, the official said adding “Cash voucher has its limitation and transferring fund into account does not translate into expenditure, as there is a tendency to save.”
On whether there could be GST rate cut for certain category of goods for a limited period, the official said a decision can be taken by the GST Council alone.
As part of the first stimulus, under the Pradhan Mantri Garib Kalyan Yojana, 20 crore women Jan Dhan account holders got ₹500 per month for April, May and June. Besides, an ex-gratia of ₹1,000 was given to ₹3 crore poor senior citizens, poor widows and poor disabled for April-June period. A sum of ₹33,766 crore was given under the two initiatives. It was expected that there will be more and more expenditure. However, data of PMJDY show people were saving more. The overall deposit of all scheduled commercial banks also showed that people were saving more than spending.
The official indicated that there could be interest support or cheaper credit for certain segments of the society as banks are flush with funds. Interest rate is already low, so benefit through interest subsidy can prompt people to spend.
Boost for MSMEs
The official quoted above said that there will be something for MSMEs in the next round of stimulus. “MSMEs are large source of employment, so any support will further boost employment,” he said. There could be new form of credit guarantee scheme as the existing one is coming to end on November 30. At the same time, there is thinking that part of EPFO contribution by employer and employee for a certain period will help MSMEs.
Services sector
There have been evidences that the services sector, be it hospitality or even airlines, have suffered most during the pandemic and they will be the last one to recover. Keeping this in mind, the Government is working on some credit support to these sectors, so that their operational cost could come down as they are still facing cash crunch. “We are working on various elements of supports and a formal announcement can be expected any time,” the official said.
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