With the second wave of COVID-19 infections showing no signs of slowing down, the government is preparing a stimulus package for worst affected sectors. The finance ministry is working on proposals to bolster the tourism, aviation and hospitality industries, along with small and medium-sized companies.
Last month, the Finance Minister Nirmala Sitharaman said she’s monitoring the economy in a very detailed manner and has also held discussions with economists about a stimulus package. She had said the government has extended the Emergency Credit Line Guarantee Scheme for these sectors. The second wave of infections has not only impacted families, it has destroyed travel as cases started increasing in March. The most industrialized states, including Tamil Nadu and Maharashtra, have imposed lockdowns to check the spread of the pandemic.
As more states implemented lockdowns, economists and rating agencies reworked on their forecasts for the current financial year. Nomura slashed FY22 forecast from 13.5% to 12.6%, while JP Morgan slashed it from 13% to 11%, UBS 10% from 11.5%, SBI 10.4% from 11%, ICRA 10-10.5% from 10-11%. Kotak Mahindra Bank 10% from 10.5% and Indian Rating 10% from 10.5%. Moreover, Moody’s cut it to 9.3% from an earlier projection of 13.7% and Barclays from 11% to 10.
Post second wave of infections, the industries are looking for a stimulus package that can breathe live. The government had launched a Rs 3 lakh crore Emergency Credit Line Guarantee Scheme in the 2020 package for MSMEs to tide over the crisis. According to the National Credit Guarantee Trustee Company on behalf of the National Institute of Bank Management, Pune, the credit provided liquidity support. But the distribution patterns have been unequal and this has reduced its liquidity benefits for the smallest borrowers and manufacturing firms.