The COVID-19 fiscal response and India’s standing -Amit Basole and Jonathan Coutinho
The relief measures do not seem to be commensurate with the economic disruption caused by the lockdown
How does India compare in the quantity and quality of its COVID-19 response to other developing countries? Here we extend our earlier analysis of India’s fiscal response (The Hindu online, “India must enhance fiscal support for COVID-19 relief and rebuilding”, April 18, 2020) drawing on the International Monetary Fund Policy Tracker, the COVID-19 Economic Stimulus Index (CESI) of Ceyhun Elgin at Columbia University, and the World Bank.
Before the announcement of the Atmanirbhar Bharat package, India lagged significantly behind comparable developing countries that are similar in GDP per capita, state capacity, and structure of the labour force. As of early July, the gap seems to have narrowed.
However, given the blurring of the distinction between fiscal and monetary components, ensuring comparable and accurate figures for fiscal responses is a challenge. For example, the total Atmanirbhar package is billed at 10% of GDP. The headline number for India’s fiscal response in international databases is around 4% of GDP. But we and others have estimated that the new fiscal outlay, including the Pradhan Mantri Garib Kalyan Yojana, of March, the direct fiscal aspects of Atmanirbhar Bharat, and the latest extension of free rations under the Public Distribution System, is around 1.7% of GDP. The one significant demand-side intervention in the Atmanirbhar Bharat package was 40,000 crore of additional outlay for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Most other demand-side measures involve the frontloading, consolidation, or rerouting of existing funds — for example, the recently announced 50,000 crore Garib Kalyan Rojgar Abhiyan, which consolidates projects of 12 ministries/departments.
On the other hand, India has surpassed almost all others in the stringency of its containment measures. As a result, the extent of relief measures does not seem to be commensurate with the economic disruption and dislocation caused by the severity of the lockdown. Vietnam, Indonesia, Pakistan, and Egypt, all while averaging less stringent measures than those in India, have announced stimulus measures that are as large or more substantial, as a share of GDP.
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The Hindu, 22 July, 2020, https://www.thehindu.com/opinion/op-ed/the-covid-19-fiscal-response-and-indias-standing/article32154153.ece?homepage=true