Team Paradigm Tuesday, 2 June 2020

Why Aatmanirbhar Bharat Abhiyan isn’t as self reliant as it seems

Prime minister Narendra Modi and Finance minister Nirmala Sitharaman’s Aatmanirbhar package, announced earlier this month, is nothing short of a grand marketing stunt that many have already fallen prey to.

On the face of it, the economic relief package; worth Rs.20 lakh crores, or to put it in more pleasing statistics, 10% of India’s Gross Domestic Product (GDP), aims to boost economic growth and alleviate the distress faced by various sectors in wake of the COVID-19 pandemic.

However, a closer look into the breakdown of the five tranches - Economy, Infrastructure, System, Demography and Demand - tells a different story; about 47% of the stimulus is from already owed dues, RBI provisions and structural reforms, raising questions on the government’s so called “revolutionary move” to be self reliant coming across as a plea to gain approval from the masses.

Economists reckon the total expenditure by the government towards the five tranches to be a mere 1% of the GDP, which equates to roughly just over 2 lakh crores, including the Pradhan Mantri Garib Kalyan Package worth 1.7 lakh crores. This could be funded by expenditure cuts from other sectors, rendering the initiative’s status as a “relief package” useless. Furthermore, it leaves several sectors high and dry as instead of tangible benefits, the package burdens them with loans.

Whether the promised “10% of GDP” was a mathematical error in the Center’s calculations or a ploy to pacify those demanding measures to ensure financial and economic stability of the country is not clear, but one thing is; the Aatmanirbhar package is unlikely to contribute to relief, and instead have a devastating fallout in the long run as banks run out of funds. Although the announcement comes as a ray of hope to those in distress, it must be noted that the plans may fall through unless they are implemented properly.