In a dramatic broadcast on national television and radio on May 12, prime minister Narendra Modi announced a Rs 20 lakh crore (equivalent to 10 percent of GDP projected for 2020-21) stimulus package to get the wheels of industry and business moving. Three days after the final instalment of the economy stimulus package was presented to the nation on May 17, the Times of India (May 20) reported that calculations and analyses of over a dozen banks — including the government-owned SBI — brokerages and rating agencies, indicate that after all the grants, loans and concessions of the package are added up, size of the stimulus is Rs 2 lakh crore, equivalent to 1-1.3 percent of GDP. 

On the other hand, Sitharaman maintains that the entire package starting from March 26 when the first Rs. 1.7 lakh crore stimulus was announced for industry and other stimuli  given to banks to ease credit flows, plus the first three  tranches of the last package add up to Rs 12 lakh crore or 6.60 percent of GDP. The argument advanced by her in media interviews was that the first three tranches of the package were carefully designed to ease the flow of bank credit to industry to pay wages and reignite the fire of India Inc, especially MSMEs. 

One presumes the FM’s preference for loans over grants and more than abundant caution that is a defining characteristic of the reported Rs 20 lakh crore economy stimulus package, is rooted in apprehension of damage to the banking system, impact on the fiscal deficit and runaway inflation. Yet it is pertinent to note that in several countries around the world, these fears have been set aside to compensate citizens for loss of jobs and livelihoods during the Covid-19 induced national lockdowns.

In the US and Canada, all citizens who have been furloughed (temporarily unemployed) are compensated with government cheques of $1,200$6,000) directly deposited into their bank accounts. More wondrously, in the UK furloughed employees are receiving 85 percent of their current pay from government with the remaining 15 percent paid by their employers. Therefore, it’s a mystery why despite over 1 billion citizens having been conferred UID (unique identity), the best that the BJP/NDA government can do is to deposit a mere Rs 500 per month into the bank accounts of 80 million women who have Jan Dhan accounts.

Against this, your editor has repeatedly sent detailed proposals to the Union government and its several agencies to directly deposit Rs 4,444 monthly for the next 12 months or Rs 6,000 per month for the next nine months, into the bank accounts of 150 million poorest households to tide them over the Covid crisis.

The finance minister still has the time and opportunity to make good the Rs 20 lakh crore stimulus package pledge of the prime minister by setting aside Rs 12 lakh crore for industry, agriculture and the services sector to boost production and employment. The remaining Rs 8 lakh crore urgently needs to be paid by way of direct benefit transfer to 150 million poorest households as grants that will also boost aggregate demand.