HYPE VS. HOPE: "Economic Stimulus package"

As we all know the lockdown has slain the economy and now the time has come to restart. To kickstart the economy central and state governments have already played its trump card by resuming the sale of liquor to run the demand-consumption chain in reverse because to restart the economy-boosting the consumption is an immediate and mandatory step. The government has increased taxes on liquor by 70-75% and claimed the intentions to curb the sale but it is evident that high prices have never caused any fall in the sale of liquor and governments have always succeeded in executing this laziest step to generate the revenue.

Further comes the pullback of lockdown in a way that balances economic need as well as medical, throughout the nation various steps have been actively taken to ensure the medical development in curbing the Covid-19 whether in terms of containing the virus or curing the infection. For bringing back the economic function to normal the Government of India has announced an "Economy Stimulus package" on May 13th. Before the announcement of the package, Indians were looking forward to some magical relief but after the announcement, they are left only confused because so much of economic discussion is beyond the understanding of common people irrespective of the catalytic drive the package is promising.

First of all, I would like to clarify that "Economic stimulus package" and "Economic relief package" are two different concepts. In latter, the government may credit cash directly in the accounts of people belonging to "MIG" and "LIG" economic strata in the form of "Helicopter money". Helicopter money is a concept where the government prints new notes and distribute to people for spending to push the consumption that leads to demand resulting into more production by hiring more labour and then paying salary to reform the economic flow in reverse order. In the coming future, a self-dependant (#आत्मनिर्भर) country like the USA may choose for a solution like this but it is not possible for a country like India, because we are importing approx 85% of gold to meet the total gold demand in the country and without the "Gold Reserve" new currency can not be printed to distribute for spending. Therefore "Direct cash support" is absurd to expect.

Second, comes the "Economic Stimulus Package" which is a vast concept where the economy is driven in a way that it works for its -- self revival. Do not forget to go with the literal meaning of the word "stimulus" which is -- a thing that arouses energy in something, that means the package is for boosting the economy and let people earn their own money rather giving money directly in their hands to spend. This package will provide liquidity measures to already announced policies by RBI. There are four cadres which will attract the boosts, namely-

1- The government becoming a guarantor for the loans borrowed by a firm from any sector to run their business by producing goods and services ⇨ hiring people⇨ paying salary ⇨ selling on higher prices ⇨ pay back the loan, in case of failure the government will pay back the loan.

2- Reduction in PF rate which will let the employer contribute lesser in the employee's account and at the same time letting him take home the more salary which will increase his spending capacity and at the end of the year paying more taxes on increased wages while playing part in the economic reform.

3- Loan of ₹90,000 crore to power distribution company for starting the electricity production, to repay the loan the power corporations will increase the price per unit of electricity for both commercial and domestic consumption which will attract revenue for the government to regulate the economy.

4- Liquidity push to NBFC, HCF and MFI by granting ₹ 30,000 crore to give loan to the public for developments in these sectors. Non-banking financial corporations(NBFC), Housing finance company(HFC) and microfinance institutions(MFI) grant loan on higher interest rates, by the government becoming guarantor it becomes easy but the borrower (public) pays back higher money than normal.

Synopsising the package, we come to know that the government is not going to spend a single penny out of its pocket for economic boost but it is making many small changes for adding more liquidity in the market. The basic idea is that the people will have more money in their hands to spend but the government is smart enough to take back the money from them either this way or that. However the optimistic figure of "20 lakh crore" will not turn out to be as same as it appears, where the package is taken as a calibrated effort to uplift the economy, a lot more depends upon its successful function.