India is preparing a stimulus package for sectors worst affected by a deadly coronavirus wave, aiming to support an economy struggling with a slew of localized lockdowns, people familiar with the matter said.
The finance ministry is working on proposals to bolster the tourism, aviation and hospitality industries, along with small and medium-sized companies, the people said, asking not to be identified as the deliberations are private. The discussions are at an early stage and no timeline for an announcement has been decided, they said. A finance ministry spokesman declined to comment.
The latest wave of COVID-19 infections has made India the global hotspot for the pandemic and has decimated travel since the second wave picked up in March even though Prime Minister Narendra Modi has refused to implement a strict nationwide lockdown like last year’s. With nearly 200,000 daily cases daily many local governments -- including Maharashtra and Tamil Nadu, India’s most industrialized states -- have imposed curbs against the spread of the virus.
That’s prompted many economists to cut their forecasts for the financial year that began April 1, as rising unemployment and dwindling savings among consumers dim the chances for double-digit growth. While the International Monetary Fund expects India’s economy to expand 12.5 percent this year to March -- and will be revisiting the forecast in July -- the country’s central bank projects 10.5 percent growth.
Flagging growth prospects put the onus on policy makers to support activity, especially once the virus caseload eases. Finance Minister Nirmala Sitharaman, who said last month she’s monitoring the economy in a “very detailed fashion, has held discussions with economists in recent days about a stimulus package, the people said.
In April, the finance ministry eased rules for capital expenditure by government departments to try to boost spending in the economy.
Pressure also is building on the central bank -- which serves as the banking sector regulator -- to ease loan repayment rules, especially for sectors badly hit by this virus wave.