Stimulus 3.0 support for growth, fiscal impact unclear: Fitch

The government on November 12 announced another stimulus package, called Aatmanirbhar Bharat Abhiyaan 3.0, totaling Rs 2.65 lakh crore. The package included a boost to formal employment, the Production Linked (PLI) Scheme, an increase in the fertiliser subsidy and the rural employment programme, MGNREGA.

Motilal Oswal, in a separate report, said its calculations suggest the actual fiscal outgo in FY2021 could be a maximum of Rs 1.1 lakh crore (0.5 per cent of GDP). This, along with the previous announcements, total fiscal package amount to Rs 17.7 lakh crore (8.7 per cent of GDP).

“However, our calculations suggest the actual fiscal outgo in FY21 could be a maximum of Rs 4.7 lakh crore (2.3 per cent of GDP),” it said.

In a report, Fitch Solutions said India’s fiscal deficit is likely to be 7.8 per cent of the GDP in the Fiscal Year’21 (April 2020 to March 2021). “While many of (Stimulus 3.0) scheme should be supportive to India’s economic rebound over the coming quarters, the actual impact on public finances is difficult to ascertain,” Fitch said.

The PLI scheme, for instance, spans across a five-year period, and their fiscal impact will likely only be seen from FY2021-22 onward. “Estimating using the outright fiscal outlays from this announcement, Moreover, the announcement did not outline any additional borrowing to finance these additional spending, which suggests a reallocation of FY2020/21 budget expenditure plans instead,” Fitch added.