STIMULUS – ALL SMOKE AND MIRROR?

about 29 days ago
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Yesterday at 3 PM, the Finance Minister announced the first stimulus package post the second wave. Everyone, till some days ago was talking about it and expecting the sky and the moon.

And when it was finally announced, it went down like air from a balloon. A small hiss – that’s the only sound one heard and it lay down there like, well, a squashed balloon.

Last time around, the FM announced many such stimulus and none of them really got the market roiled up; that explains why the slew of stimulus of yesterday were a damp squib with the market not even raising an eyebrow or making a whimper.

So, why did the market not give a damn? Simply because, historically, these measures always seem like a half-hearted attempt to help; its not all out, leaving one feeling that “wish they had done something seriously.”

Like for tourism, which is hurting the most. Waiving off visa fees for five lakh tourists sounds very good but look at it collectively - $30 to 60 per traveler when the industry is all but wiped out; it is like a drop in the ocean. Instead, if the FM had said that visa fees will be waived off for one year, maybe that would have been a much better thing to do.

And seriously, its not like tourists are waiting to come to India; its going to take a while for them to feel safe enough – what with images of funeral pyres, bodies in the Ganges and shortage of oxygen; well, it will take a long, long time.

Mind you, these are not small billed stimulus – extension of Rs 1.1 trillion worth of loan guarantees for Covid-affected sectors, spend Rs 23,220 crore for pediatric care in the current fiscal year, increased the overall limit for the Emergency Credit Line Guarantee Scheme announced last year, by Rs 1.5 trillion, provide guarantees for lending by microfinance institutions up to Rs 1.25 lakh. The billions and trillions are simply beyond our small minds and truth being told, none of us know whether these really work or they mostly remain only on the paper.

Agreed that the extension of credit, guarantees and lower interest help will 100% help but we see very few around us who have benefitted; reality is that on the ground, nothing much will change. The Govt’s focus is on providing relief – last time too and this time too; the tune now has to change from relief to increasing demand. The RBI is doing everything possible to give an impetus to growth by ensuring ample liquidity remains in the system. The Govt needs to work in tandem and work on boosting demand, giving big fiscal boosters.

So, that’s what this new slew of measures were – all smoke and mirrors.

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