India unveils US$22.6 bil stimulus plan to ease virus pain

Empty roads outside iconic Chhatrapati Shivaji Maharaj Terminus are seen during lockdown. (AP pic)

NEW DELHI: India announced a 1.7 trillion rupee (US$22.6 billion) spending plan as part of measures to ease the economic impact of the coronavirus pandemic on the poor in the world’s most populated nation after China.

The plan will include cash transfers as well as steps on food security, Finance Minister Nirmala Sitharaman said in New Delhi Thursday. The package will benefit migrant workers, she said.

Cash support listed by the finance minister includes payments to farmers under an existing income support programme.

Free cooking gas to the poor for three months, state-sponsored contributions to retirement funds for the same duration and insurance cover of 5 million rupees to medical workers are also part of the plan, she said.

Asia’s third-largest economy joins countries from the US to Germany that have pledged spending to contain the economic fallout of the pandemic that’s infected close to 500,000 people globally.

India is on a total lockdown for three weeks from Wednesday in the world’s biggest isolation effort, as Prime Minister Narendra Modi seeks to prevent the virus from spreading locally.

The government hinted that more measures are on the cards.

“Today’s measures are very clearly aimed at reaching out to the poor,” she said. “I will gradually address if there’s more to attend to.”

Sitharaman didn’t respond to questions from reporters on how the government will finance the measures or if they are from previously budgeted programmes. She didn’t also say if the government would need to borrow to finance the proposals.

The government targets a budget shortfall of 3.8% of the gross domestic product in the current year and 3.5% in the year starting April 1.

“At this stage I’m more concerned about reaching out to those who need the help,” Sitharaman said.

The measures came on a day when Singapore boosted its virus package to 11% of the city state’s GDP.

“The lack of support for smaller businesses is glaring and is likely to deepen the economic damage,” said Priyanka Kishore, head of economics for South Asia and South-east Asia at Oxford Economics. “The package pales in comparison to the one we saw in Singapore.”

India’s government earlier allowed companies to divert their philanthropy spending to support the virus fight, corralling more resources, and eased regulatory rules such as extending deadlines for filing tax returns and waiving penalty on companies for not holding board meetings for a certain period.

The central bank, which has been injecting dollar and rupee liquidity, is set to announce its interest rate decision next week.