Is there a shift in the approach of the government in its strategy to boost the economy and bring it back on the rails? Sanjeev Sanyal, economist and India’s principal economic advisor, seems to think so.

Sanyal says there is a clear message that the latest economic stimulus package is intending to deliver. Speaking to Fortune India, he says, “We are now shifting from the earlier approach between April and July, of providing a safety net, to now an investment and growth approach.”

The intent of the latest stimulus package, he says, “is to get the employment and investment from the private sector going. Therefore, we have provided an incentive to the private sector to hire people with an employment subsidy. So, if they start hiring people into the formal sector, the government will pay for the EPF contribution. [The] same thing we are doing in the PLI (Performance-Linked Incentive) schemes. After seeing its initial successful roll-out we are expanding it now to more sectors.”

However, not all economists seem to share this view. A leading economist, preferring to speak on condition of anonymity, says, “There is no big bang government capital expenditure with huge backward and forward demand linkages to really lift up the economy. It seems more of an attempt to address the issues faced by various sectors. Each item taken by itself seems reasonable and may help stimulate the economy, though a large part of it all is still in the form of credit.”

Sanyal, however, finds fault with this argument. He says, “Our entire approach is fundamentally different from what other countries have been doing. What they were doing during the lockdown was trying to re-inflate the economy and demand (with a big expenditure push). We felt there is no point [in] pressing the accelerator when we have our foot on the brake.”

M. S. Sriram, chair, Centre for Public Policy at the Indian Institute of Management, Bangalore (IIMB) and an expert in the financial inclusion space, says, “They have got the concept but not the context. What is needed is to spur demand across the board. The type of reforms that the package is presenting are basic and structural in nature and should be done in normal times and not quite in times of firefighting. Except for the packages that directly put cash like the Garib Kalyan Yojana, all other structural aspects such as PLI, One Nation One Ration, credit guarantee schemes, stimulus for investments should have been done in 2014 or anytime before the pandemic. At this time, there is no harm for the government to even rely on using the UPA's promised idea for minimum income support.”

The specific measures announced in the package have, however, been hailed by most in the industry.

Take for instance, the measures to provide additional support to farmers for fertilisers. S. Sivakumar, who heads the Agri and IT businesses at ITC Ltd and has been the brain behind its e-choupal initiative, tells Fortune India, “Timely intervention is critical in agriculture and this year, all through the pandemic, Indian agriculture has shown resilience, aided by the buying support through the Rabi harvest and access to inputs for Kharif planting. Now the additional ₹65,000 crore being provided for fertilisers will enable adequate and timely availability of nutrients to the farmers during the Rabi crop cycle. The expanded coverage and an even larger outreach for credit flow will also go a long way in strengthening farmer capacity.”

On employment generation, for those with a monthly salary of ₹15,000, the central government will provide a subsidy for two years in respect of new eligible employees to the tune of 24% of the wage; that is ₹3,600 for a monthly salary of ₹15,000, working out to ₹43,200 annually. Even if 10 employees are added, the figure is ₹4,32,000, which is not a small amount for an establishment employing up to 1,000 employees.

On some of the other measures, Chandra Shekhar Ghosh, managing director and chief executive officer of Bandhan Bank, says, “The performance-linked incentives for a large number of industries including MSMEs; more funds for the Pradhan Mantri Awaas Yojana; and funding support for infrastructure projects not only offer immediate support for the economy, but also cater to longer term considerations such as boosting infrastructure and job creation.” He also feels the “fresh allocations to the Pradhan Mantri Garib Kalyan Yojana should benefit the bottom of the socio-economic pyramid, which is the need of the hour.”

A major thrust in the stimulus package was also on the research and development for an Indian Covid-19 vaccine. The government has provided ₹900 crore to the Department of Biotechnology for the Covid Suraksha Mission aimed at research and development of an Indian Covid vaccine.

“This was long overdue and the ₹900 crore could help propel companies to invest in Indian Covid vaccine development and could trigger more competition and help reduce prices,” says K. V. Balasubramaniam, a vaccine expert who was the former managing director of Indian Immunologicals and is currently an independent consultant in life sciences.

Those within the industry say it could roughly take anywhere between ₹50 crore and ₹100 crore to take the vaccine in India from lab to market unlike in the West, where the costs could be anywhere between $600 million and $1 billion and more depending on the vaccine.

The income tax relief for residential real estate developers and home buyers has also been hailed as a measure aimed at clearing the real estate inventory. Ramesh Nair, CEO & country head, JLL, says, “Developers will now have the incentive in the form of this revised tax provision to pass on the benefit of lower market prices to buyers without incurring additional tax liability under the erstwhile provisions.” This, he feels, is timely because as of end-September 2020, developers had a locked in capital of nearly ₹3.7 lakh crore, with unsold inventory to the tune of more than 450,000 units at various stages of construction across the top seven cities.

At the end of the new stimulus package is a summary of the big numbers. The latest package 3.0 of the measures add up to ₹2,65,080 crore, or about 1.3% of India’s GDP. And the sum total of the stimulus till date is ₹29,87,647 crore, or nearly 15% of the GDP.

Some, however, argue that these numbers are still not translating into a lift-off that the economy ought to have had with such backing. For instance, M. V. Rajeev Gowda, economist and head of the Congress party’s research cell, asks: “Why are banks still flush with funds and the credit outflow to the targeted sectors still not happening in a big way?”

How the new stimulus takes effect may provide some answers.

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