The economic stimulus: More for supply, less for demand

The finance minister’s fifth and final instalment of the stimulus came on Sunday. The government says the economy has got a push worth more than Rs 20 lakh crore. However, experts say most of it is in liquidity & guarantees, and unlike many other major economies, there’s not much direct cash support or demand push. Over the medium term, the economy should get a reform boost, they say, but recovery from Covid shock will likely take longer.
What the package delivers on?

Reforms
A] New definition of MSMEs

B] Agri marketing reforms
C] Coal, minerals liberalisation
D] Higher FDI in defence production
E] Airport, discom privatisation
F] New policy for PSUs

Liquidity
A] Collateral-free loans/equity for small business
B] Special liquidity and partial guarantee for NBFCs
C] Funds for discoms; PF relief
D] Rs 2.3 lakh crore extra credit to farmers

Infrastructure push
A] Affordable rental housing for migrants
B] Extension of middle income housing scheme
C] Agri infrastructure fund
D] Higher VGF for social infrastructure

Helping stressed business
A] Relaxation in insolvency law
B] Liquidity support/refunds
C] Funds for stressed NBFCs

What the package does not address…
1] Businesses may get helped over time, but current stress may continue due to lack of demand
2] That is crucial because nearly 60% of economy is private consumption
3] And consumption sentiment is down because of job losses/pay cuts across classes
4] There’s no policy to directly boost job creation
5] There’s also not much cash support/direct relief for low income unemployed
6] So, consumers likely to stay very cautious
7] Even more so because there isn’t much for middle class
8] Therefore, low demand may continue and pull economy down