Was speaking yesterday to business people, industrialists & economists about the 20 lakh crore package. Here is a thread on the feedback I got. There is a demand side and a supply side to the economy. Right now both are hit badly. #AtmaNirbharBharatPackage 1/n
Supply side is struggling to pay salaries, restore supply chains and manage debt repayments without any revenues. However all these are issues that can to some extent be managed. If the entrepreneur feels that there will be a demand for his product he will borrow. 2/n
Govt is also making it easier to borrow.However if he feels there is unlikely to be any demand for his products why would he take on more debt?He will likely retrench staff, cut costs, downsize &wait for things to improve. So for supply to do well demand is needed 3/n
If people don't have jobs or fear losing them or if your business is doing badly there is no inclination to spend. The focus will be on saving every rupee you can by cutting whatever expense you deem non essential. That had already started to happen even before #covid 4/n
Now that may be accelerated even further. Without demand Industry will also start to stagnate soon as low sales will lead to production cutbacks and downsizing on supply side. So Govt must do everything to stimulate demand, that is, get people to spend. 5/n
How do you get people to spend? By putting money in their pocket,by ensuring as many people can stay in their jobs & creating a feel good effect to extent possible. In the present situation all these measures may not boost demand like before but it's the best shot at revival 6/n
Sadly the Govt.'s economic package seems heavily tilted towards supporting the supply side with hardly anything announced so far likely to help boost demand. Without demand rising the Govt can give as many loans as it wants but things can't improve significantly. 7/n
This is why most countries have responded by giving cash handouts to the needy, the jobless and also to the employers so that they can retain staff for longer without feeling the pinch. Bulk of many countries' economic packages hv been focused on this. 8/n
Without providing basic minimum income and cash support across a broad spectrum of people the view is that reviving the economy is going to be tough. Feedback even from pro BJP industrialists is that the present package isn't going to do very much to help. 9/n
It does have some good announcements that will certainly be needed but ignoring demand creation they say is its biggest folly. Cutting personal income tax rates, reducing GST rates & even refunding part of GST paid are some measures expected besides the basic min income 10/n
for the poor. In the absence of these steps it is going to be a long painful recession. And blaming @nsitharaman alone won't do. She isn't the one coming up with all this though she is clearly out of depth. Feedback welcome. #AtmaNirbharBharatPackage 11/11.
