Congress Party briefing by P Chidambaram and RS Ssurjewala via video conferencing
P Chidambaram :
- Last evening, PM announced an Economic Stimulus Package to re-start the stalled economy& stated that its size will be Rs 20 lakh crore. As expected, & as perhaps it was intended by the Govt, it grabbed the headline. The page, however, was blank.
- We were promised that the details of the fiscal stimulus package would be announced by the Finance Minister over the next few days, beginning today. It was therefore with great expectations that I listened to the FM at 4 pm today.
- What did the FM tell us?
- There will be a collateral free loan programme to 45 lakh MSMEs, backed by a Credit Guarantee Fund of Rs 3 lakh crore, and some other measures including Rs 20,000 crore subordinate debt and Rs 10,000 crore equity fund.
- The government will extend Rs 2,500 crore liquidity support to EPF contributions – Government will give credit guarantee for NBFCs investing in debt instruments of MSME, HFCs and MFIs (Rs 30,000 crore)
- Liquidity will be provided to generating companies & Discoms
- Time to be extended by 6 months for govt contracts – TDS rate to be reduced up to 31-3-2021 (Rs 50,000 crore) & tax refunds to be expedited for all
- There is nothing for the lakhs of poor, hungry and devastated migrant workers who have walked and many thousands are still walking back to their home states. This is a cruel blow dealt to those who toil every day.
- There is also nothing by way of cash transfer to the bottom half of the population (13 crore families) who have been pushed into destitution. Only yesterday, Prof Thomas Pikketty pleaded for cash transfers to the poor.
- The FM announced some support measures for MSMEs, although my comment is the measures were skewed in favour of the larger MSMEs (about 45 lakh MSMEs). I think the bulk of the 6.3 crore MSMEs were left high and dry.
- We welcome the offer of subordinate debt (Rs 20,000 crore) and equity corpus fund (Rs 10,000 crore), but we will await the ‘terms and conditions’. The devil is in the detail.
- On the credit guarantee fund, it is not the entire Fund that will be actually spent. The expenditure will be limited to the extent of NPAs in the outstanding guaranteed credit to MSMEs.
- Assuming an NPA level of 20-50 per cent, the actual expenditure over the period of the loans (which may be years) will be a maximum of Rs 3,00,000 crore.
- We will also count the Rs 30,000 crore credit guarantee to NBFCS. We will therefore include Rs 3,60,000 crore in the Rs 20 lakh crore package.
- I refrain from commenting on liquidity related measures. Such measures do not amount to fiscal measures of support and nowhere in the world are they included or counted in a fiscal stimulus package.
- Where is the rest of the Rs 16.4 lakh crore? This government is a prisoner of its own ignorance and fears. The government must spend more, but it is not willing to do so.
- The government must borrow more, but it is not willing to do so. The government must allow states to borrow more and spend more, but it is not willing to do so.
- Except for the modest MSME package, we are disappointed with today’s announcements.