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Below is Quote on FM announcement by Mr. Dhananjay Sinha, MD & Chief – Strategist, JM Financial Institutional Securities Ltd 

Fiscal cum credit package for economic revival and Covid preparedness

On the lines of the Rs 20tn stimulus package announced last year, the GoI has announced another Rs 6.3tn package to mitigate the impact of Wave 2 and potential further waves. The points that characterizes the package are a) the government is willing to extending fiscal space to aid economic revival, though a mix of credit guarantees and fiscal allocations, b) rural and agri sector remains a focus area, given larger impact of Wave-2, c) renewed focus on Covid preparedness both through facilitation of expansion of hospitals and investments in Covid related health facilities, and d) intent to revive small businesses, project exports, industries and tourism. The direct fiscal cost of the package is estimated at Rs 1.5tn, including Food distribution (Rs 938bn), Fertilizer subsidy (Rs 148bn), Health (Rs 232bn, GoI Rs 150bn & balance states), and rural broadband (Rs 190bn).  In our earlier notes we have already accounted for possible fiscal slippage of around Rs 1.8tn for GoI; today’s package will add a little more.

At the broad level we see this package aligning with the two packages earlier announced by the RBI to address similar sectors. Thus, the fiscal cum credit packages can seen as providing support and impetus to rural consumption, agri sector, building material, and micro finances.

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