Why A Stimulus Can't Wait

Second wave has created massive uncertainty. Only answer is massive spending

- Saubhik Chakrabarti

“The budget … will have to go down to the people,” FM Sitharaman told TOI, answering this newspaper’s question on whether GoI should provide a large economic stimulus. Her point being that critics asking for a fiscal boost should recognise that we are just two months into the new financial year, and that the budget’s expenditure package, designed for a “Covid-affected economy”, should be allowed to play out.

She’s not wrong. Her February budget was widely praised for its focus on spending. The thing is, India in June is a different country from India in February. Hence the question: Is that budget, good as it was, sufficient for these times?

Covid’s second wave destroyed much as it rolled through India. Perversely as well as predictably, it also strengthened a formidable enemy of economic growth – uncertainty.

Four months after Sitharaman’s best budget, the worst sort of uncertainty confronts every economic decision-maker, from migrant workers to middle-class professionals to maharajas of India Inc.

This uncertainty is defined both by direct material costs of the second wave – businesses and job-creation hit by local lockdowns and falling sales, household budgets and consumption hit by current and anticipated Covid medical care – as well as by fearful questions about the near future.