India / How does India’s Economic package compare to spending by other countries?

New Delhi: Union finance minister Nirmal Sitharaman on Sunday announced the last tranche of the government’s five-part policy reform and fiscal incentive package worth Rs 20,97,053 crore.

Nirmala Sitharaman’s announcement is part of a slew of measures announced by the government for micro, small and medium enterprises (MSMEs), agriculture, migrant workers, defence, businesses, and other segments.

This followed Prime Minister Narendra Modi’s announcement of a Rs 20 lakh crore package, worth about 10% of the gross domestic product or GDP, for the economy to overcome the distress caused by the coronavirus pandemic and the lockdown as well as to build an Atmanirbhar Bharat or “self-reliant India”.

The government has provided Rs 11,02,650 crore stimulus in the five tranches, Sitharaman said. Earlier, stimulus worth Rs 9,94,403 crore was infused in the system through fiscal and policy measures that included Rs 1.70 lakh crore relief package on May 26 and Rs 8,01,603 crore monetary measures by the Reserve Bank of India (RBI) since March 27.

In terms of spending as a share of GDP, 6.4% or Rs 12,95,450 crore has been committed to food security, direct cash transfer, money for rural job guarantee scheme, and credit guarantee to MSMEs among others.

The government has announced a policy rate cut and other measures to boost liquidity at 3.9% of GDP or Rs 8,01,603 crore in terms of monetary and micro-financial assistance.

Here is how India’s measures in terms of fiscal aid and monetary and macro policy assistance compare with some other key nations:

United States

The US has announced 2.3% of its GDP in Paycheck Protection Program and Healthcare Enhancement Act. The Paycheck Protection Program was established by the US Congress in late March and aimed at helping businesses keep making payroll for eight weeks, despite orders to shut down because of the coronavirus pandemic. The eight-week period may be applied to any time frame from mid-February up to June 30.

It has committed 11% of its GDP in CARES Act. US lawmakers agreed on the passage of a $2 trillion stimulus bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act in March to blunt the impact of an economic downturn set in motion by the coronavirus pandemic. President Donald Trump signed the bill into law on March 27.

The US announced another 1% in the Families First Coronavirus Response Act (FFCRA), which was created to expand paid leave options for employees effective from April 2 through December 31, and supplemental budgetary allocation made thereafter.

The Federal Reserve also slashed the interest rate at the discount window — the rate at which banks borrow money directly from the Fed — by 150 basis points to just 0.25% in March “to help meet demands for credit from households and businesses.” The US also gave facilities to ensure the flow of credit.

China

China announced 2.5% of its GDP in terms of fiscal measures and of which 1.2% of GDP measures are already being implemented. It also has additional measures such as the announcement of local bonds worth 1.3% of GDP.

It has put 3.2% of GDP in liquidity infusion and 1.7% of GDP in re-lending and rediscounting facilities.

The People’s Bank of China has announced rate cuts in the range of 10-150 bps.

Japan

Japan is on top of the list of countries’ spending and has announced an emergency economic package of 21.1% of GDP. In this, 16% aimed at protecting employment and business.

There has been a host of measures including liquidity provision by an increase in size and frequency of Japanese government bonds and concessional loan facilities for small businesses.

Germany

Germany has committed 10.7% of its GDP to fight the coronavirus pandemic induced sluggishness in the economy with a supplementary budget of 4.9% of GDP focusing on providing short-term work and preserve jobs. It is using government guarantees to increase credit volume by at least 23% of GDP.

The state government packages over and above this.

In terms of monetary and macro-financial, there are additional asset purchases and an extension of European Central Bank (ECB) norms, which include prohibiting banks from paying dividends for FY 2019 and 2020 and/or buying back shares.

Germany has also said that conserved capital is to be used to support households, small businesses and other borrowers. The payment moratorium on consumer loans established before March 15 is granted until June 30.