Ahead of Nirmala Sitharaman’s press conference, reports say there is a Diwali stimulus package coming

• The report indicates that under this scheme, the government may give a 10% subsidy on provident fund (PF) contributions for both employees and employers.
• However, the package size could be much smaller than the last stimulus package of ₹20 lakh crore, which included a lot of earlier announcements.
• As per the RBI data released yesterday, the GDP is likely to contract by 8.6% for the July-September period, which means India will enter into a recession for the first time in history.

Hours before a press conference scheduled to be addressed by the Finance Minister Nirmala Sitharaman, a CNBC Awaaz report says India is likely to announce another set of stimulus packages focused on incentives for stressed sectors, middle-income groups in urban and rural areas, and employment generation, ahead of Diwali.

The report suggests that the package size could be much smaller than the last stimulus package of ₹20 lakh crore, which included a lot of announcements made prior to the pandemic.

What is expected in the package?

The government may introduce the Pradhan Mantri Rojgar Protsahan Yojna, a scheme meant to boost employment, in an expanded form as a part of the new package. The report indicates that under this scheme, the government may give a 10% subsidy on provident fund (PF) contributions for both employees and employers.

It may also announce the Emergency Credit Line Scheme part-2 as a part of the new package. Under which the government is likely to provide collateral-free credit, and similarly some special incentives for specific sectors may also be part of the new package.

Another report also pointed out that the government was also mulling over infusion in the form of direct cash, but from the past trends, it was observed the measure was not beneficial. The trends indicated that people’s spending has come down drastically, and the decision of direct cash benefit won’t hold.

The government’s efforts so far have seen limited impact in stalling the COVID-19 crash. They have also been constrained by declining resources. It has already increased its borrowing to a whopping ₹13 lakh crore to make up for the shortfall in revenue for the current fiscal year.

The Indian economy contracted by a record 23.9% in the first quarter, as the country went into the lockdown to curb the spread of the virus. And, as per the latest RBI data released yesterday, the GDP is likely to contract by 8.6% for the July-September period, which means India will enter into a recession for the first time in history.

Investors have not been enthused by the possibility of cash injection in the economy. The half a percent fall in Sensex and the Nifty, benchmark equity indices, reflected the caution in the market.

SEE ALSO: Indian government approves the Production Linked Incentive scheme for 10 sectors worth ₹2 lakh crore

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