Government Defends Move to Combine Fiscal and Monetary Measures in Stimulus Package

The government on Friday defended its decision to include Rs 6.5 lakh crore liquidity measures in its COVID-19 stimulus package, saying most countries have combined fiscal and monetary initiatives to deal with the crisis.

Many analysts and political leaders have expressed dismay over inclusion of monetary interventions in the stimulus package.

Explaining this, Expenditure Secretary T V Somanathan said unfortunately the argument is not correct and the fact is that packages announced by most countries are a combination of actual fiscal outgo and liquidity provisions.

For example, he said, "One country that gave out what is called a 15 per cent (of GDP) package which a lot of people talk about. Please look at it, 14.9 per cent of it was liquidity. So, it is not as if only one part of a package is counted."

There is a mix of fiscal measures and liquidity provision, and almost every country in the world counts it this way, he said.

"Some have counted something, left out something, but it is not as if it is only we who are counting this way. This is in fact the way most of the countries are counting it," he added.

Countering the criticism that the government has included both fiscal and monetary initiatives in the package, Union Finance Minister Nirmala Sitharaman said when tax refunds are being given, it is not included in the stimulus package as it is the money due to the taxpayers.

"We are given it back...we are not delaying we are not sitting over it. I am giving it to you now because money is required now and it should reach now. I didn't mention even then...tax refund money has not gone into our calculation in claiming what we are giving as stimulus," she said.

Economic Affairs Secretary Tarun Bajaj said the government is actually telling what is the liquidity and what is going through the budget.

"The important thing today to understand is also that the liquidity is also helping the stressed sector to come out of that stress. So, what is the objective of doing that. One way could be to give the money from the Budget, the other is, whether we do it through a process which is different," Bajaj added.

Prime Minister Narendra Modi on Tuesday announced a massive Rs 20 lakh crore stimulus, the largest economic package announced by nations around the world, to weather the fallout of the coronavirus pandemic.

Asked about the dues the various central departments owe to MSMEs, Sitharaman said the government has been reviewing the pending payments to such units.

The government has asked all departments to clear dues of these MSMEs within 45 days, except litigated ones, she said.

Senior Congress leader P Chidambaram took a swipe at the Centre, saying the ministers of finance and MSMEs should "settle their accounts" first and allow the MSMEs to save themselves without the government's "help".

He highlighted the differences between Sitharaman and MSME Minister Nitin Gadkari, with the latter saying that governments and PSUs owe Rs 5 lakh crore as unpaid dues to the micro, small and medium enterprises (MSMEs), while the finance minister has said the government will offer collateral-free loans worth Rs 3 lakh crore to the MSMEs.

Expenditure Secretary Somanathan said as of March 31, 2020, total pending dues of such units from central government and central PSUs are less than Rs 10,000 crore.

Most of the pending dues fall under the stipulated 45-day payment period, he added.