In his recent address to Nation Prime Minister Modi announced “The mega Rs 20 lakh crore ECONOMIC STIMULUS PACKAGE” to deal with the economic loss caused by Corona Virus Pandemic. I think many people just didn’t understand what exactly it is and how is it going to REVIVE the collapsed economy of the nation. Frankly saying even, I don’t understand the economic things in general and this is in particular. We all know, the world has been crippled and the economies of the nations across the globe have suffered a great downfall, at present. India is no different!! So amidst this financial crisis how the 20 Lakh Crore STIMULUS Economic Package announced by Honorable PM of India, which is around 10% of our GDP, would come to rescue is an important thing to understand.
Here is Mr.Biranchi Narayan Acharya, @one of the finest and seasoned Political Analyst and Observer, and a fortunately my brother, explains it in easy words. Let’s understand what exactly it is and how is going to help the business and economy of the nation….
I am not an economist, but then my long experience in current affairs and political observing taught me many things. Thus, I want to clarify some doubts asked to me on the 20 lac crore rupees package/stimulus announced by central government. Let’s see some reactions.
Chidambaram said the package is a jumla and nothing else. Some criticized it as a serial (As Union Finance Minister declares measures phase wise). Dr Udit raj, an ex-BJP member who joined Congress because BJP denied ticket to him in 2019 for non-performance as MP earlier demanded minimum 10% of GDP as package but now ask where from the money will come. He further cited Manmohan Singh’s most infamous dialogue if money grows in tree.
To add more confusion many Congress member asked whether this 20 lac crore will be spent from budgetary provisions or central government will borrow this amount? Finally Rahul Gandhi said that the money should be transferred to migrants directly.
Now, I don’t know or understood whether they know about an economic package or stimulus or that they just confuse people knowing very well what the “Stimulus” is.
I know my readers prefer a simple explanation of any complicated matter. Thus let me give an example of financial stimulus. This will clear “What a Financial Stimulus precisely means?”
Let’s assume a hypothetical scenario. You gave some loan to your friend for a shop. Due to some problems, his shop gutted in a fire accident. He needs to be provided a stimulus so that he can be able to revive his business.
How should be your stimulus? Will you waive out your loans? If yes, then you relieved him off any loan, but then there won’t be any revival of his business.
The true stimulus is that you restructured his loan repayment extending it for a longer period and also you re-finance him at a lower interest in a longer term so that he can return all your money in an extended period while reviving his business. You can also ask him not to return part loan for a specific period (for example until his shop started to function).
You can also make some rule or amend some condition of the loan for his revival.
The bottom line is very simple. If you don’t give such a stimulus then your friend is finished at the same time your money given to him as loan also gone. Thus, a stimulus is always a win-win situation. Your friend is revived, and your money also saved.
All these things have got a monetary value. The interest you forego, the amount you refinance, the total saving of interest of your friend and most importantly your friend’s reduction of loss due to your quick refinancing, all these are computed in a monetary term.
Neither your capital is lost, nor your friend suffered more loss and the loss of the business entirely. Means, he doesn’t have to close his business, instead work on it…i.e. REVIVE!!
Same thing applies to government and the people including business folks. In such a financial situation, government provides some measures such as low rate financing, change of laws and many other things ( you can go through the declaration of Union Finance Minister, if you really understand this post ) which has a monetary value of 20 lakh crore. Package doesn’t mean distributing money. Therefore, don’t be confused and understand what an economic package or stimulus is…
I am not an economist, but then my long experience in current affairs and political observing taught me many things….
Posted by Biranchi Narayan Acharya on Saturday, May 16, 2020
So, basically there is a fundamental difference between “FINANCIAL RELIEF PACKAGE” and “A FINANCIAL STIMULUS PACKAGE.” A Relief Package helps to survive immediately whereas the Stimulus Package helps not only to Survive but to Stand Again and back on the track.
20 Lakh Crore package is a STIMULUS one. As I said earlier, I did not understand what and how exactly it is going to REVIVE the Economy. But now it is clear to me.
Well my most concern was for MIGRANT LABORERS Community who have been the worst victims of this pandemic. They are acutely depressed at present. I was apprehensive, thinking in what way it’s going to Help them.
Well….since MSMEs going to be given a stimulus package, the factories and industries will start again. They are the most absorber of the Migrant Workers. So, they are going to get the work, at list soon. For them job loss will not be an issue. And I hope the relief package that are announced earlier will be distributed with more transparency. Which in return should help the migrant survive the current time.
At last, I would like to say,
The only thing I wish…with this Corona Pandemic, at least The Migrant Laborer Sector should be made More Organized as they are our Core Workforce. It’s heartening and acutely depressing to see these people suffer…for no fault of theirs.
what a simple way of explaining this economic package announced by the Govt .I really admit that i am very weak in economics or rather i say being a technocrat,economics is my low priority area.
Last Tuesday, Prime Minister Narendra Modi announced that India would come out with a Rs 20-lakh-crore economic package, which is equivalent to 10 percent of the nation’s GDP.
That was followed by the finance minister’s five briefings in coming days and translated by official translater Anurag Thahur ?? in Hindi.
The whole day they were on every channel.
Sach kahun, tho maine kutch suna hi nahi.
Actually i have my own apprehensions about Govt schemes being a Govt employee due to their well known reasons.
The next day my wife called and asked me that what is the scheme all about ?? I was totally off guard and blank ?
I told her, i would let you know afterwards if i would be able to understand.
BNA sir explained the fundamental difference between “FINANCIAL RELIEF PACKAGE” and “A FINANCIAL STIMULUS PACKAGE.” very nicely and in a lay man language.I think most of the people will understand this easily now.
Thank you BNA sir.
Thank you Tinaji for sharing this well written blog.
Keep it up…..!!