R Krishna Das
The stimulus announced by Finance Minister Nirmala Sitharaman to boost demand in the economy might go well with the steel and cement industries but was unlikely to push the consumption sector.
The government estimated a demand boost of Rs 73,000 crore before 31 March 2021 via its newly announced schemes. The total additional demand was expected to exceed Rs 1 lakh crore.
Out of it, Rs 36,000 crore additional consumer demands were expected to be generated through the LTC voucher scheme and the special festival advance scheme. The remaining Rs 37,000 crore would be in the form of additional centre and state capital expenditure.
The stress had been on the capital expenditure where the states and centre would be spending more on projects that have been outlined in specific areas like roads, urban development, defence and water supply. States have been given the option of using these funds to make payments for existing projects and expediting.
There would be uncertainty that the Rs 12,000 crore allotted to the states, which had to be repaid over 50 years without any interest, would necessarily flow for the fresh projects. The allocation for states was not in the proportion to change the investment structure and would be useful only in completing projects stalled for funds.
The centre would spend Rs 25,000 crore on investment, which would be more direct and help the related industries. There would be a positive impact on industries like steel, cement, capital goods etc.
The special festival advance scheme would be interest free and both gazetted and non-gazetted officials would be able to draw an advance of Rs 10,000 that needed to be paid back in ten instalments. Since the advance would be without any purchase-condition, it could be taken for regular grocery shopping also.
Hence, the sum of Rs 8000 crore being spoken of might not go for consumer goods. Moreover, it was unlikely that employees would cash in their LTC as well as take an advance to buy consumer goods. Some of the white goods manufacturers and auto dealers could see an increase in demand this festival season.
