Modi's 'Stimulus Package' is a Gigantic Confidence Trick Played on the People of India -Prem Shankar Jha
Eighty per cent or more of the demand in the economy has vanished thanks to the lockdown he hastily announced, with no warning or preparation. The only way out is to pump money in to revive demand.
In a discussion on NDTV about the contents of the third tranche of Prime Minister Narendra Modi’s stimulus package for the economy, Yogendra Yadav, one of India’s most respected psephologists, called it ‘entertainment’. Yadav is a gentle human being who goes out of his way to avoid giving offence. Above all on TV. So “entertainment” was the most civilised word he could think of. I will be a little more blunt. Not just the third tranche, but the entire ‘stimulus package’ advertised by Modi on May 12 is a gigantic confidence trick being played upon a desperate public with money that does not exist.
First, of the Rs 20 lakh crore, Rs 1.7 lakh crore had already been disbursed to the government in the first days of the lockdown. Its salutary effect is therefore long over. Another Rs 5.2 lakh crore was to have been disbursed as loans by the Reserve Bank, which brought the borrowing rates for doing this down to levels not known since 2010. But there were no borrowers. So the commercial banks were left with no option but to park all of that money in the RBI’s reverse repo account, which swelled from Rs 3 lakh crore on March 27 to Rs 8.4 lakh crore by the end of April.
Modi and finance minister Sitharaman should have learned a lesson from the RBI’s failure, but they didn’t. So again, all the grand promises they have made are premised upon the belief that manufacturers will need only a little more encouragement to start queueing up for loans.
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TheWire.in, 18 May, 2020, https://thewire.in/political-economy/modis-stimulus-package-is-a-gigantic-confidence-trick-played-on-the-people-of-india
Tagged with: Economic Stimulus Effective Demand Rural Demand Unemployment Job Losses Joblessness Lockdown Informal Economy Migrant Workers Migrant Labourers Reserve Bank of India RBI Repo Rate Reverse Repo Rate