Government works on a fresh stimulus of the second Quarter: 100 days and GDP shrinks

After 100 days of economic package announcement by the Finance Minister Nirmala SitaRaman, series of high-level meetings and 23.9% Contracting GDP reports of the first quarter Q1, government has finally comes to term with “non-salaried middle class and small business” as the target audience for the next round of stimulus.

Nirmala SitaRaman had already announced the five tranches of Atmanirbhar Bharat package in the mid-May. This economic package adding up to the Rs 20 lakh crore. It was much of a liquidity support and extra fiscal by the Central government just over by 1%. As the first quarter contracted hitting its lowest, second quarter is also expected to hit the same as August-September not showing any vigilant response and big recovery.

Government seems to be ignorant over providing financial assistance to those who needed the most. An Official said, “This round of fiscal stimulus will be more for the group which is not completely poor and not rich. This in-between, the non-salaried middle class, it is the most affected. The timing of the rollout is crucial in getting the maximum benefit.”

Prime Minister Narendra Modi presided over presentations by members of his Economic Advisory Council, NITI Aayog, Chief Economic Advisor’s office, the Ministry of Finance and the Ministry of Commerce, discussing over fiscal stimulus.

Several Cabinet Ministers agreed on the fact that they are optimistic about Prime Minister Narendra Modi’s step towards building consensus within the government for a bigger stimulus.Those present in the meetings included Sitharaman, Rajnath Singh, Amit Shah, Nitin Gadkari, Piyush Goyal and Gajendra Singh Shekhawat.

But the government has hardly made any announcements over the last six weeks based on these discussions. “We got the impression that the government will press the accelerator… but doesn’t seem like that,” said an official.

The government officials said that he believes it has provided substantially for the poor in terms of making available food grain, cooking gas and income from MGNREGA work, “The non-salaried urban and rural people, who are not abject poor, and do not have an assured income, are the ones who have been left out in the previous packages. These are the small businessmen and shop owners, such as an air conditioning repair shop or similar ones,” the official said.

“There is a general consensus that more demand is required. But funds are limited, and there is a binding factor on the quantum. It is not clear what can be done that will make it directly effective. There are different opinions, we still need to work out the details,” the official said.

An official said, “Further there are expectations that the services sector, especially the non-financial services sector, might continue to drag for a while. Several discussions are learnt to have been held about whether a tax break could be given for a limited time period to restaurants in the service sector, but the decision did not materialise as it was thought it may not yield an immediate boost to consumption demand, another.