Coronavirus stimulus package: Comparing India and the rest of the world

On Wednesday, Finance Minister Nirmala Sitharaman had laid out the measures that the Centre will to take to contain the economic impact of the coronavirus.

Sitharaman's announcement comes a day after Prime Minister Narendra Modi, in an address to the nation, said that the Government will spend as much as Rs 20 lakh crore to tackle the impact of the coronavirus on the economy. He said that the Government will focus on land, labour, liquidity and laws.

What did Nirmala Sitharaman emphasise on?

In her press conference, the Finance Minister focused on providing relief to micro, small and medium enterprises (MSMEs), non-banking finance companies (NBFCs), power distribution companies (aka DISCOMs) and the real estate sector.

The announcements saw mixed reactions.

In fact, former Finance Minister and Senior Congress leader P Chidambaram said that he was disappointed. He said that the Centre had announced Rs 3 lakh crore of collateral-free loans for small businesses, and wondered what happened to the remaining Rs 16.4 lakh crore.

A comparative study

How does the Narendra Modi-government's stimulus plan compare to relief packages announced by other nations by governments all over the world?

Here’s a look.

1. Fiscal packages

Governments all over the world have announced plans to protect their economy as many nations announced stay at home orders in a bid to stop the spread of the coronavirus.

Rest of the world (RoW): Many big economies have earmarked a significant portion of the gross domestic product (GDP) to stop the ill effects of virus on their economy and people. The data, compiled by economist Ceyhun Elgin, shows that Japan has announced a stimulus package which is more than 21 per cent of its GDP. The United States (US) (13.3 per cent), Australia (10.8 per cent) and Germany (10.7 per cent) follow.

India: Modi’s mega plan, combined with previously announced plan, is roughly 10 per cent of the GDP. This is the fifth-largest among the G-20 economies. 

2. Direct cash payments

The lockdowns in various countries were disruptive to many, but it was catastrophic to workers. Many governments across the world paid cash to workers so they could survive.

RoW: Many nations like Canada, US, Hong Kong, Japan and Thailand have followed this policy. Canada is already providing CAN$2000 for four months (from April) to those who have lost their jobs, are sick or have to stay at home. In the US, eligible persons apply for a one time payment of $1,200. Hong Kong is providing a cash handout of  HK$10,000 for each permanent resident aged 18.

India: No new scheme was announced on Wednesday. The poor received modest benefits from the first stimulus package -- ₹500 each to women Jan Dhan account holders, ₹1,000 for senior citizens, poor widows and the disabled. It also hiked the payment for MNREGA and front loaded PM-KISAN payments. However, on Wednesday, it was announced that Rs 1,000 crore from the money donated to PM CARES fund will be used to take care of migrant labourers. This money will be used by the State and UTs to provide accommodation, food, medical treatment and transportation to the migrants.

3. Financial assistance to corporations

Due to the shutdown, many corporations were unable to function, and some have become too big to fail.

RoW: The US created a $500 billion dollar fund to bailout failing corporates. This includes helping aviation, healthcare and sectors of national importance. The French government is all set to provide  a bailout of 7 billion euros to Air France-KLM. In April, The French finance minister  Bruno Le Maire said that the government had earmarked 20 billion euros for bailouts.

India: The Finance Minister announced a scheme to provide liquidity to power distribution companies. She announced a ₹90,000-crore loan “against State (government) guarantee” to power distribution utilities (discoms) to mitigate the liquidity crisis in the power sector.

To provide relief to the real estate sector, the FM announced easing in regulations for those projects that were stalled. The Housing and Urban Affairs Ministry will advice States/UTs and their regulatory authorities to extend the registration and completion data suo moto by six months for all registered projects expiring on or after March 25, 2020, without individual applications, she said.

The Government also looked to infuse liquidity for NBFCs. The Finance Minister announced Rs 30,000 crore to buy investment-grade debt of NBFCs, HFCs and MFIs. She also announced a partial credit guarantee programme worth Rs 45,000 crore.

4. Loans for small businesses

To prevent additional burden during lockdown, many nations announced fresh loans and moratoriums on loans for small businesses.

RoW: Most countries offered small businesses emergency loans and fast access to credit during this period. Many nations are also providing tax relief for these businesses. Others, like Japan, have schemes to cover two thirds of the rent of small businesses for up to six months.

India: For the MSME sector,  the Centre announced six measures to help easy access to credit and equity infusion. The FM announced three big schemes -- a collateral free loan scheme, loans for critical MSMEs and mega 'fund of funds' to provide liquidity.

The FM also tweaked the government tender process to help MSMEs and extended the loan moratorium scheme. The centre will pay its dues to MSMEs within 15 days.  

5. Paying employees

Businesses, both large and small, struggled to pay their employees during the lockdown. To prevent job losses, many governments the world over announced various measures.

RoW: The US, announced a Paycheck Protection Programme to help small businesses keep their employees on payroll. If the workers are fired, then the federal government has also increased unemployment benefits. The United Kingdom has a scheme to provide nearly grants covering up to nearly 80 per cent of the salary of workers if companies kept them on their payroll. Denmark also has a similar scheme to pay 75 percent of employees’ salaries to avoid mass layoffs. Time span is three months. Thailand has allotted $18 billion to provide financial aid to temporary workers, contract workers and the self-employed. 

India: In her press conference, Finance Minister Nirmala Sitharaman did not announce any scheme to help corporates pay their employees. However, she said that the TDS (tax deducted at source)/TCS (tax collected at source) rate has been reduced by 25 per cent. The move is expected to release about Rs 50,000 crore in the hands of people. She also announced that the the direct tax dispute resolution scheme Vivad Se Vishwas has been extended till December 31, 2020. 

She also said that all pending refunds to charitable trusts, non-corporate business and professions, including that of proprietorship, partnership, LLP and cooperatives, will be issued immediately.

COMMENT NOW