Covid-19 infused fiscal stimulus worth Rs. 11.4 lac crore or 5.2% of GDP

Covid-19 Stimulus package features an additional fiscal infusion of Rs. 11.4 lac crore (5.2% of GDP). The quantum is in addition to the budget estimated fiscal deficit of Rs. 7.96 lac crore and includes Government of India’s estimated revenue loss of Rs. 2.6 lac crore. The latter is funded via the additional borrowings of Rs. 4.2 lac crore, with the remaining Rs. 1.6 lac crore available for the actual stimulus package. The estimated Rs. 0.5 lac crore loss by way of lower than estimated nominal GDP growth is also included in the additional borrowings as per the renewed GOI borrowing calendar. We note that roughly 2% of GDP worth fiscal deficit has been transferred to states, which have been allowed to raise the equivalent quantum of Rs. 4.26 lac crore in addition to their planned quota.

When considering the entire package as part of the fiscal calculations, Central Government’s fiscal deficit will reach 5.9%, excluding state’s share of additional fiscal debt and 7.9%, while including the latter. In terms of quantum, the fiscal deficit will be worth an estimated Rs. 16.78 lac crore, including the budgeted fiscal deficit and Rs. 19.38 lac crore with revenue loss compensation of Rs. 2.6 lac crore.

Breaking down the Rs. 11.4 lac crore, apart from the Rs. 1.6 lac crore available for stimulus (part of Rs. 4.2 lac crore additional borrowings), we believe that the Central Government will be spending an additional Rs. 2.96 lac crore under various schemes announced. This quantum is to be divided among various fiscal heads such as Kisan Sampada Fund (Rs. 0.99 lac crore), MGNREGA (Rs. 0.4 lac crore), PM Kisan Scheme (Rs. 0.3 lac crore), and Interest Subvention & Contribution for Guarantee Fund (Rs. 0.29 lac crore) along with Strengthening of Power Systems schemes.

As per our previous calculations based on a daily economic loss methodology, we estimate that for the first 60 days of the lockdown, GOI revenue will be roughly 48% of actuals (budget estimates). Considering that there will be considerable opening up of the economy, June 1 onwards, the revenue loss is estimated to be Rs. 2.6 lac crore. This number may however rise if the lockdown is extended even after May 31st, consequently impacting these calculations and leading to additional borrowings going forward.

 Fiscal Head

Budget Estimate

Additional Allocations

Final Estimate

 MGNREGA

61500

40000

101500

 PM Kisan Scheme (A)

75000

30000

105000

 Kisan Sampada Fund (B)

1081

98919

100000

 Swasthya Surakhsha Yojana

6020

3500

9520

 Interest Subvention & Contribution for Guarantee Funds (C)

1900

29000

30900

 Strengthening of Power Systems (D)

1843

45000

46843

 Forego of Taxes (E)

0

50000

50000

 Total

147344

296419

443763

Source: Government of India # Scheme Allocation: Acuité Research Estimation All figures in Rs. Crores


A.
Includes the post-harvest fund worth Rs. 30,000 crore via NABARD

B. Creation of agro-processing clusters (Gate to Retail) and related infrastructure development fund

C. Includes EPFO compensation fund, Mudra Shishu loan interest subvention fund and the mother-daughter equity infusion fund for MSMEs under stress (50% utilization per annum)

D. Assuming center’s share at 50% in Discom equity infusion

E. Includes tax foregone by way of TDS/TCS tax reduction

Budget Estimate
(% of GDP)

Actual Estimate
(% of GDP)

Post Stimulus Estimate
(% of GDP)

Post Stimulus Estimate
(+State's Share) (% of GDP)

3.5%   

3.7%   

5.9%   

7.9%   

Source: Government of India; Acuité Research


  Centre' Share

 

 BE Fiscal Deficit (1)

7963370000000

 Funds Available after additional borrowings (excluding revenue compensation) (2)

1600000000000

 Additional Stimulus (3)

2964190000000

 Additional Centre Fiscal Support (2+3)

4564190000000

 Centre Total Fiscal Support (1+2+3)

12527560000000

 Fiscal Deficit

5.9%

 

 

 State's Share

 

 State Additional Borrowings (4)

 4260000000000

 

 

 Total Centre + State Fiscal Support (1+2+3+4)

16787560000000

 Fiscal Deficit (Including State's Share)

7.9%

Source: Government of India; Acuité Research
All figures in Indian Rupees


Although the Government of India has made it clear that no additional borrowings may occur this financial year apart from the already notified additional borrowings, there is confusion regarding the source of the additional expenditure by way of schemes announced.

The fact remains that over 61% of the Rs. 4.2 lac crore raised by the Centre additionally as per its revised borrowing plan, will actively help it achieve the status quo, i.e. maintaining and servicing budget estimated standard obligations for the year. Since, the stimulus scheme will be mostly sponsored by the central government there is a lack of clarity regarding how the Rs. 2.96 lac crore of additional stimulus spent will be financed. We believe that in an event of non-issuance of any more sovereign debt, GOI may choose to revise the ‘Major Scheme Outlay’ plan for the year and allocate funds as per its current requirements, cannibalizing funds from schemes that may be superseded or can be merged.
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