Government Stimulus Package Has A Supply-Side Bias: CRISIL

Rating agency CRISIL has flagged that in absence of sector specific stimulus, the near-term benefits of Rs 20 lakh crore stimulus package on growth will be muted.

“while most steps from government are steps in the right direction, it is unlikely to stimulate demand/consumption given that the package is more focused on supply-side reforms,” its research wing said in a note.

Most of the analysts have cast a doubt on the series of announcement by the Finance Minister Nirmala Sitharaman. The growth will contract in FY21 as the demand side push is still missing.

In the note, the analysts at CRISIL also voiced some concerns over there being no announcements for highly vulnerable sectors such as airlines, tourism and hotels.

“Further, while the government has not added much to its current year fiscal outgo – and thereby deficit – it will weigh on public debt next fiscal unless the economy revives,” it warned.

The agency also said that the actual fiscal impact of the announcements is far lower than the headline amount of the stimulus because a lot of the measures are through aspects like guarantees.

At Rs 1 lakh crore, the actual fiscal outgo is just 9 percent of the Rs 11 lakh crore worth of measures announced by Sitharaman, it said.

“Given the fiscal constraints, the government has undertaken measures that can magnify the impact of every rupee of stimulus. Hence the liberal use of guarantees and tiered funding structures,” it said.