Centre’s Rs 20 Lakh Crore Package Fails to Provide Economic Boost

Despite the Indian government’s Rs 20 lakh crore economic stimulus package aimed at reviving the economy amid the COVID-19 pandemic, the results have fallen short. According to recent data from the Comptroller and Auditor General (CAG), government expenditure between April and July 2020 increased by only 11.3%, a marginal rise from Rs 9.47 lakh crore in the same period the previous year to Rs 10.54 lakh crore. 

This indicates that the stimulus package, designed to provide a major boost, did not create the expected momentum.

Key Factors Behind the Economic Strain

• 30% decline in government subsidies: Impacting unorganized sector workers.
• Fiscal deficit exceeds targets: 103% of the budget estimate by July 2020.
• Reduced spending in key sectors: Road construction, urban development, and policing were affected.

Decline in Government Subsidies

One of the key areas of concern is the 30% reduction in government subsidies, which primarily affects the unorganized sector, including farmers and laborers. These subsidies play a crucial role in supporting the country’s poorest citizens, particularly during economic crises. The reduction in these essential subsidies during the height of the pandemic exacerbated the difficulties faced by vulnerable populations, many of whom struggled without adequate financial support.

During the April to June quarter, several critical sectors experienced a decline in government spending. Key sectors such as road construction, urban development, and policing saw significant cuts, raising questions about where the funds from the stimulus package were directed.

Fiscal Deficit Exceeds Targets

One of the biggest challenges the government faced was the widening fiscal deficit. According to the CAG, the fiscal deficit had already reached Rs 8.21 lakh crore by July 2020, which amounts to 103% of the fiscal year’s budget estimate. This figure surpasses the previous year’s deficit for the same period, which stood at 79%.

The Union Budget for 2020-21 had set the fiscal deficit target at Rs 7.96 lakh crore. With eight months remaining in the fiscal year, it is likely that the government will revise this target due to the significant shortfall in revenue and increased expenditure.

Revenue Shortfall Compounds the Crisis

Adding to the economic strain is the government’s revenue shortfall. By July 2020, the government had only achieved 11.3% of its revenue target, a sharp decline from the 19.5% reached during the same period the previous year. The government’s total revenue for April-July 2020 amounted to Rs 2.27 lakh crore, highlighting the shrinking income sources available to the central government.

The Centre’s ambitious Rs 20 lakh crore stimulus package, intended to combat the economic fallout of the COVID-19 pandemic, has failed to provide the much-needed momentum for India’s economy. 

With reduced government subsidies, declining revenue, and an expanding fiscal deficit, the government faces mounting challenges in the months ahead. The results of the second quarter, expected in October, will offer a clearer picture of the economic pressures and whether any course corrections are on the horizon.