How analysts and economists view government’s stimulus

How analysts and economists view government’s stimulus

By Reuters

  • 13 May 2020
How analysts and economists view government’s stimulus
Credit: Reuters

India's government said on Wednesday it will offer nearly $60 billion of loan guarantees for small businesses, shadow banks and power companies as part of measures to combat the economic damage caused by the coronavirus pandemic.


Rahul Bajoria, chief India economist, Barclays, Mumbai


"We believe that the government today has unveiled support close to almost 5.95 trillion rupees, with another 6.7 trillion rupees (2.3% of GDP) of spending announcements likely over the coming days."

"The impact on the fiscal deficit will likely be smaller than the headline figures announced by the government, and by our calculations, today's measures will take up 555 billion rupees of total fiscal spending on balance sheet, which indicates that the government can still spend 1.35 trillion rupees of GDP on balance sheet in further measures."

"We believe the government may end up with a fiscal deficit of close to 6% GDP during FY20-21 We await clarity on next set of measures in coming days."


Anuj Puri, chairman, Anarock Property Consultants, Mumbai

"Providing a major relief to real estate developers, the government has extended the timeline for project completions and registration by 6 months. This is a big move that will de-stress developers significantly, since construction activity had been halted all across the country. Homebuyers' wait for their homes will get extended by this move, but this was in any case inevitable."

"Further, the announcement of 30,000 crore rupees special liquidity scheme for NBFCs/HFCs and MFIs will ease liquidity woes of stressed players."


"This will benefit the real estate sector significantly, given that NBFCs and HFCs are major lenders to it."

Ram Raheja, director, S Raheja Realty, Mumbai

"We welcome the government's stimulus boost to spur growth and build towards a self-reliant India. The 75,000 crore rupees liquidity boost for NBFCs is a meaningful step and directed in sheer interest of the industry."


"These steps will help ease the liquidity concerns for the real estate sector as the strengthening of the NBFCs to lend will in turn enable liquidity flow in ecosystem. Any measures that help boost the real estate sector will help in revival of the economy. Overall, we see this as a positive move."

Nikhil Kamath, co-founder & chief investment officer, Zerodha & True Beacon, Bengaluru

"India's biggest economic stimulus approximating 10% of India's GDP is difficult to fathom. The government has however announced a commitment towards making systemic changes in the ecosystem which will give an unprecedented boost to COVID-ridden markets. MSMEs and local manufacturing will see a short term rebound in sentiment."


"NBFCs are getting some much-needed liquidity as well. We applaud the government's restraint in coming out with these announcements, but key will be the implementation of this stimulus which could be the deciding factor in ascertaining the recovery."

Sharad Mittal, CEO, Motilal Oswal Real Estate Fund, Mumbai

"The FM has announced a suo moto relief of 6 months for the RERA completion timelines for all projects in all states with an additional window of 3 months that can be granted by the individual state authorities."

"Considering that projects are likely to be delayed by at least 4 to 6 months due to the lockdown, this is a welcome move for all real estate developers."

"However, it does not address the larger liquidity and cashflows related challenges faced by the developers."

Sreejith Balasubramanian, economist, IDFC AMC, Mumbai

"The credit guarantees are not amounts which go into fiscal deficit fully, like the 3 trillion rupees for MSMEs. These are contingent liabilities. The actual amount of government outgo will be much lower."

"But the measure works with a multiplier and it mainly improves risk appetite of banks and triggers lending to smaller firms. The recent increase in borrowing of 2% of GDP might cover only the fiscal slippage from revenue and non-debt capital receipts and may not fully cover the stimulus being announced."

"Additional borrowing cannot be ruled out, both through dated securities and short term t-bills."

Prithviraj Srinivas, chief economist, Axis Capital, Mumbai

"Large credit guarantee for MSME sector will ensure that businesses have the ability to pick-up and restart when the lockdown is lifted."

"Today's measures will help avoid large-scale business closures, which would have impacted the financial system systemically and broken supply chains. Tranche 1 from the 20 trillion rupees economic package has neutralized rising risk perception in the supply side of the economy."

Sanjoy Dutta, partner, Deloitte, Mumbai

"The 30,000 crore rupees Special Liquidity Scheme for investing in investment grade paper of NBFCs/HFCs/MFIs is very positive as it directs liquidity where it is most required and will enable these institutions support their borrowing customers through this period of cashflow stress."

"Detailing and execution of the scheme is key, to ensure there is equitable distribution of the funds across the eligible borrower set."

Rupa Rege Nitsure, chief economist, L&T Financial Holdings, Mumbai

"I don't think this package will create much stress for the fiscal exchequer as most of the measures are focusing on liquidity and off balance sheet support through credit guarantees and tax deferment. This is the need of the hour as it would restore some good credit channels."

"During 2020, the nation's recovery will essentially be driven by agri & rural economic activities, and support to NBFCs given in the package will play a major role in taking the credit to the remote corners of the economy."

Kunal Kundu, India economist, Societe Generale, Bengaluru

"As per fiscal 2.0, MSMEs would be mixed beneficiaries of likely credit flow. Bank lending to MSMEs directly may have limited impact despite the 3 trillion rupees credit guarantee scheme announced."

"The guarantee is for firms with 250 million rupees outstanding loans or annual turnover of over 1 billion rupees. This rules out loans to micro and small companies which do not come under the definition."

"As per new definition, the official estimate is that there are 63.38 million small and micro firms and only 5,000 medium firms. This means the beneficiaries would be from these 5000 firms only."

"However, injection of 200 billion rupees of subordinate debt will help the small companies. Also, the liquidity injection scheme for lower and even unrated MSMEs and 100% credit guarantee for investment grade papers would ensure improved flow of fund to the MSMEs through the NBFI route."

Arvind Chari, head-fixed income and alternatives, Quantum Advisors Pvt. Ltd, Mumbai

"The announcement of 100% guaranteed loan for MSME is a big move and will help the sector which has been crippled since demonetization and GST and many would have got annihilated with the lockdown. And so is the move for bond buying of NBFC with guarantee, which will resolve the failure of TLTRO 2.0."

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