Indias historic $266 billion relief package will leave a lasting global impact
$266 billion is a humungous number, but just how significantly large is it in real life
$266 billion is enough money to connect all villages in India with optical fibre broadband 2.8 times. It's the equivalent of what the Indian government invests in its ambitious infrastructure projects in a year. It's enough money to complete all Indian Railway infrastructure projects for at least 12 years. And it's nearly enough money to cover the entire GDP of Pakistan - which stands at $284 billion in the aftermath of Covid-19, according to World Bank estimates.
But that's the unprecedented stimulus package that Indian Prime Minister Narendra Modi announced on Tuesday night for Covid-19 relief - a package worth 10 per cent of the country's GDP. This is the largest economic relief effort that India has ever seen and will “give a new momentum to India's development journey and put India on the road to self-reliance,” to use the Prime Minister's own words.
Today's announcements by FM @nsitharaman will go a long way in addressing issues faced by businesses, especially MSMEs. The steps announced will boost liquidity, empower the entrepreneurs and strengthen their competitive spirit. #AatmaNirbharBharatAbhiyan
- Narendra Modi (@narendramodi) May 13, 2020
As economic stimulus plans go, India's relief measures are also among the world's largest packages unveiled so far in terms of percentage of GDP. Japan has rolled out stimuli worth around 21% of its GDP and the US around 13%, but China - from where the virus originated - has so far spent less than 4% of its GDP in countering its catastrophic economic impact. Indeed, India's relief package is even bigger than the individual GDPs of Portugal, Greece or Vietnam.
While the contours and granular details of this historic package become clear over the next few days, it's very apparent that the biggest beneficiaries will be the micro, small and medium-scale enterprises (MSMEs), along with the vulnerable rungs of Indian society that were hit the hardest by the devastating impact of the pandemic. A renewed focus on self-reliance and buy local will also bring back the rightful emphasis on the Make in India initiative that has attracted global investors from far and wide.
Here are four ways how:
Huge boost for MSMEs
In announcing the details of PM Modi's vision for Covid-19 relief, Indian Finance Minister Nirmala Sitharaman said in New Delhi on Wednesday that unsecured loans totaling Rs 3 trillion will be offered to as many as 4.5 million small businesses until October 31. "Essentially this is to spur growth and to build a very self-reliant India. It addresses ease of doing business, compliance and due diligence and the intention is also to build local brands,” she said. Since MSMEs form the bedrock of India's $2.7 trillion economy, any measures to stabilize them will also lead to a ripple effect on hundreds of enterprise start-ups funded by non-residents and venture capitals and reassure investors in those sectors with recent FDIs about business viability during this time of global uncertainty.
Government under the able leadership of PM @NarendraModi ji revises the definition of MSMEs to encourage growth. #AatmaNirbharBharatAbhiyan pic.twitter.com/YpJf0PLoqD
- Piyush Goyal (@PiyushGoyal) May 13, 2020
Be a partner to local growth
As announced by PM Modi, India's Covid-19 relief package will focus on land, labour, liquidity and laws to revive the economy, along with generating substantial demand. A cornerstone of India's policy in the coming days will be a laser-sharp focus on nurturing local brands and bringing them up to compete at the global level. “From today onwards,all Indians should be vocal about local,” is what the Prime Minister exhorted the nation to follow - and the global Indian diaspora can become a responsible partner in that quest for self-reliance by supporting and investing in the gazillions of available local opportunities, from manufacturing to services and micro industries. The planned integration of the local and global value chain is also where NRIs can leverage their expertise to build capability for such enterprises.