PM said 20 lakh crore package for Coronavirus crisis: Here’s the reality

India has already spent half money, only 10.24 lakh crore (5.2 % GDP) remains

Prime Minister Narendra Modi announced the much-awaited 20-lakh relief package in the Tuesday address. He said that the amount included the earlier reliefs provided by RBI and finance Minister’s fiscal package. He also announced that the total amount accounts for the 10 per cent of the total GDP of the country. In the fifth address of Prime Minister in wake of coronavirus, he stressed on the self-reliant India and urged people to consume local brands.

The 20-lakh crore relief package and 10 per cent of the total GDP sounds big but will burn only a small hole in the government’s finances. A large part of the package, 8.04 lakh crore has been already injected by the Reserve Bank of via various measures in the last three months.

When we add 1.7 lakh crore fiscal package announced on 27^th March by FM Nirmala Sitharaman, the total amount stands at 9.74 lakh crore. The remaining amount which will be put by the government seems to stand at 10.24 lakh crore. The details of the economic package will be revealed by the Finance Minister on Wednesday at 4 PM as this has a bearing on the bond markets.

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Math of 20 lakh crore package

1. Liquidity rejection through RBI measures: Rs 2.8 lakh crore on February 6 – accounts 1.4 per cent of GDP
2. Liquidity injections through RBI announcements: Rs 3. 74 lakh crore on March 27 – accounts 1.8 per cent of GDP
3. Rs 1.7 lakh crore fiscal package announced by FM Nirmala Sitharaman – accounts for 0.85 per cent of GDP
4. Targeted Long Term Repo Operations 2.0: Rs 50,000 crore on April 17 – accounts 0.25 per cent of GDP
5. Refinancing of Sidbi Nabard and NHB: Rs 50,000 crore on April 17- accounts 0.25 per cent of GDP
6. Special liquidity facility for mutual funds: Rs 50,000 crore on April 27 – accounts 0.25 per cent of GDP

The total amount adds to 9.74 lakh crore which is 4.8 per cent of GDP. This means the government will put 10.24 lakh crore more which is 5.2 per cent of GDP.

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India to spend fifth most across the world in terms of GDP percentage

Overall, by putting 10 per cent of the total GDP, India has ranked 5^th in the list of countries who have spent money in terms of GDP percentage. Japan has spent the most 21.1 per cent, US on second at 13.0 per cent, Sweden on third with 12.0 per cent, Germany on fourth at 10.7 per cent and then India on fifth at 10.0 per cent. Other countries who have given lots of money as a relief package are France at 9.3 per cent, Spain at 7.3 per cent, Italy at 5.7 per cent, UK at 5.0 per cent, China at 3.8 per cent and South Korea at 2.2 per cent.

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