Economic stimulus, by definition, is action by the government to encourage private sector economic activity by engaging in targeted, expansionary monetary or fiscal policy.
Policy tools often used to implement economic stimulus include lowering interest rates, increasing government spending, & QE, to name a few. All these tools are means to stimulate demand & spur consumption to keep the economic cycle moving.
However, how providing a loan or credit to a section of the society can be considered as a stimulus package? By a similar measure, can we treat it as income in our books instead of showing it as a liability so that we never have to repay it?
As of 2019, the total loans disbursed by all banks increased from 87.46 lac crores to 97.10 lac crores. That would be an 9.64 lac crore 'Economic Stimulus' in 2019, going by this accounting!
By the way, the banks don't have a choice but to grant an additional loan to ensure that the MSMEs survive and don't turn sick! It is a normal banking practice!
It is true that some loans have been announced with government guarantees and that may lead to bad loans and will have a fiscal impact. But that happens in usual time also.
By terming providing 'loans' as stimulus, we are just indulging in financial and accounting jugglery
As Tom Hanks said in the movie Sully - "Can we get serious now" ?
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