Bernstein: India’s Rs. 20-Lakh-Crore Economic Package ‘Aimless’

Bernstein: India’s Rs. 20-Lakh-Crore Economic Package ‘Aimless'

Global research firm, AB Bernstein is not impressed by the announcement of India’s economic package worth, Rs. 20 lakh crore. The package announced by the Finance Minister, Nirmala Sitharaman to revive the economy hammered due to the Coronavirus.

In a strategy note, the firm said that although this package has important phases, many measures included in this package should have been part of a normal economic agenda. This makes this package aimless. He further said that overall it is a lost chance for India.

According to Bernstein analysts, no tangible decisions were present in the package that would aid consumption and improve manufacturing. So, the package is a complete failure as it lacks things that are required to revive the Indian economy. The broader reforms announced in the package lack “spark”, they said. Last Tuesday, Prime Minister announced that India would come out with a Rs 20-lakh-crore economic package. This package is equivalent to 10 percent of the nation’s GDP.

Bernstein: India’s Rs. 20-Lakh-Crore Economic Package ‘Aimless'

That was followed by the finance minister’s five briefings in as many days, outlining its details. The last tranche of measures was announced on Sunday. The package included liquidity measures already announced by the Reserve Bank of India, loan guarantees, and increased spending on some areas such as the rural jobs guarantee programme. While the headline number is huge, the actual government spending remains small with the RBI’s earlier measures forming the biggest part.

Bernstein further said that many choices made in the package were confusing; like impacted, urban, corporates, infrastructure, and consumption sectors should be focussed but the Government focussed on a market with weird end i.e. on the rural economy. He added that incomes generated from farms are already secured yet various loans were announced in the package for the Agriculture sector, where many loan schemes were redundant.

Apart from the flaws, the Bernstein analysts praised some measures in the package; like fresh credit guarantees for small businesses and extension of the employment guarantee programme and food provisions to migrant workers and poor. However, the firm said that this package does not make any difference for investors because this package will not help India’s economy to revive.


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