Economists at SBI on Wednesday said a bulk of the Rs 1.75 lakh crore coronavirus aid package announced by the Cecludes budgeted elements and pitched for a Rs 3 lakh crore top-up to help the economy tide over the COVID-19-related challenges.
Only Rs 73,000 crore of the Rs 1.75 lakh crore package announced by Finance Minister Nirmala Sitharaman last month is fresh money as the rest was already budgeted for, the economists said, adding a "large fiscal package" for affected industries" is necessary at this point.
The already sagging economic growth is expected to go down further due to the COVID-19 pandemic, which has led to a three-week lockdown across the country starting March 25. Some analysts believe GDP growth will come at 2 per cent for FY21.
"... given labour and capital income loss of around Rs 3.60 lakh crore, the minimum subsistence fiscal package must be scaled up by Rs 3 lakh crore, over and above the incremental Rs 73,000 crore that was unleashed in the first phase," an SBI economist said in a note.
The note said 98 per cent of the banking system's outstanding credit is in the 284 districts of the country affected by the COVID-19 and asked for needful attention to be given to the banking system.
Joining other watchers, the economists at the country's largest lender also called for some relief to the troubled NBFCs sector, which has been excluded from the three-month moratorium on loan repayments to financial institutions, and warned that if things deteriorate there will be an erosion of capital for such entities.
Similarly, from a labour perspective, the dent is maximum in the hotels, trade, education, petroleum and agriculture sectors, while self-employment accounts for 30 per cent of the GDP, it said.
"A fiscal package is imperative now," it reminded the policymakers. In what can be said as a brighter side, the economists estimated credit offtake has increased in the final fortnight of March across various verticals, despite the COVID-19 scares, which illustrates confidence within businesses of a surge in demand post-lockdown.
They estimated the incremental credit offtake at Rs 2.10 lakh crore in March, of which agriculture will be Rs 10,000 crore, industry Rs 1.20 lakh crore, services Rs 60,000 crore and personal loans Rs 20,000 crore.
The note welcomed talk of a staggered pullout from the lockdown and pitched for top preference to be given to agriculture and procurement, followed by inland transport (both roads and railways), a trading activity that supports over 25 crore households, hotel services and limited construction activity to be allowed in the unaffected areas.
From a demographic perspective, they said the population should be divided into the hospitalised, immunity compromised, and healthy individuals and we should have a well-defined strategy for each group as there is no herd immunity in the population for COVID-19.