A short overview of 20 lakh crore economic relief package introduced by the government of India to revive the economy from the effects of COVID-19.

1. Government Of India
20 Lakh Crore Covid
Package
MANINI BINDORIA

2. INTRODUCTION
● Prime Minister Narendra Modi announced on May 12th 2020 announced a Rs 20 lakh crore
package which is 10% of India's GDP. The combined package works out to roughly 10
percent of the GDP
● The Rs 20 lakh crore package includes Rs 1.7 lakh crore package of free foodgrains to poor
and cash to poor women and elderly, announced in March, as well as the Reserve Bank's
liquidity measures and interest rate cuts. While the March stimulus was 0.8 percent of GDP,
RBI's cut in interest rates and liquidity boosting measures totaled to 3.2 per cent of the GDP
(about Rs 6.5 lakh crore).Financial relief package of Rs 1.7 lakh crore which was intended for
the most vulnerable sections of the society including farmers, labourers, daily wage earners,
women and disabled people. Along with monetary relief, the government also provided food
grain under the previous package.

3. BREAKDOWN
● The five part stimulus package announced beginning May 13 comprised Rs 5.94 lakh crore in
the first tranche that provide credit line to small businesses and support to shadow banks and
electricity distribution companies.
● The second tranche included free food grain to stranded migrant workers for two months and
credit to farmers, totalling Rs 3.10 lakh crore. Spending on agriculture,infrastructure and other
measures for agriculture and allied sectors in the third tranche totalled to Rs 1.5 lakh crore.
● The fourth and fifth tranches that dealt mostly with structural reforms totalled to Rs 48,100
crore

5. CRITICISM
Financial experts and groups have expressed disappointment over the Covid-19 package with
some economists dismissing the government's claim that the measures are a stimulus equalling 10
percent of GDP. Some have pointed out that the actual Covid-19 package is about 1 percent of the
GDP. The rest are repackaging and appropriation of liquidity measures announced by the RBI.
Low demand and low investment mean less revenue generation or income for the government.
Since private money cannot be invested forcefully, the government is the only agency left to give a
boost to the economy of families and the country.

6. IMPACT
The direct and immediate relief under the PM Garib Kalyan Yojana was close to Rs 1 lakh crore, the
current set of announcements has a meagre amount of around Rs 65,000 crore, which is 0.5% of
the total quantum. These relief measures are in the nature of food relief, interest subventions,
employee guarantee spending, PF relief and partial spending on the agriculture sector
infrastructure.
A number of fiscal deficit (as a % of GDP) will be presented by experts ranging from 6.5% – 8% of
GDP but the reigns of managing this number remains entirely with the government as the are
measures of around Rs 60,000 crore which do not detail the duration of spending and the economic
impact on India’s nominal GDP will still take time to unfold.

7. MY VIEW
The package which was introduced by the Government of India had a very positive impact as it was
to make India a self reliant country but on the other hand there were people from other sectors who
did not benefit from these and they should have been included in this Package.One can identify a
number of sectors which didn’t find mention in the various measures. However, the sector which
really missed out was the healthcare sector. Though there has been an allocation of Rs 15,000
crore for health, India’s public healthcare spending is 3.6% of India’s GDP in 2016 as against
notably higher number for developed countries and 5%-9% for key developing countries. A long-
term solution to increase the public sector spending will have to be on the cards in the next budget
for both Centre and states.
The unprecedented COVID-19 challenge was novel as a health crisis led to supply chain disruptions
and added to India’s lingering demand side concerns. Overall, the economic package has some bits
for a wide range of economic agents.