{"id":1751,"date":"2020-07-20T04:51:04","date_gmt":"2020-07-20T04:51:04","guid":{"rendered":"https:\/\/demoitc.com\/resurgentindia\/?p=1751"},"modified":"2026-04-27T04:54:25","modified_gmt":"2026-04-27T04:54:25","slug":"fiscal-impact-due-to-atmanirbhar-package","status":"publish","type":"post","link":"https:\/\/demoitc.com\/resurgentindia\/fiscal-impact-due-to-atmanirbhar-package\/","title":{"rendered":"Fiscal Impact Due to Atmanirbhar Package"},"content":{"rendered":"

Revenue contraction due to COVID-19 linked lockdown amid a slowing economy would force state governments to borrow more and hence will have a higher fiscal deficit. Despite strong pressure from India Inc for large fiscal stimulus, the Modi government has primarily relied on loan guarantees and liquidity support as there is little room to relax fiscal deficit target without inviting rating downgrade.<\/p>\n

\nThe overall package consists of three primary components \u2013 a set of measures taken by the government before Modi\u2019s speech on May 12, the Reserve Bank of India\u2019s liquidity measures over the last two months, and the five tranches announced by Nirmala Sitharaman over the last few days. By the government\u2019s calculations, the package comes out to Rs 20.97 lakh crore.<\/p>\n

\nEven though the announcements made are worth over Rs 20 lakh crore, the actual cash outlay by the government this year and the impact on the fiscal deficit will be far less. This is because many of the government\u2019s proposals are credit-focused or are aimed at easing liquidity concerns for many affected sectors. In some of these cases, any costs incurred will be initially covered through banks or other financial institutions and thus not result in actual cash outgo by the Centre. Other initiatives, particularly those made in Tranche 3, may only be ramped up over an unknown period of time and therefore may not be fully relevant for the fiscal deficit calculations this year.<\/p>\n

\n \"\"<\/p>\n
<\/div>\n<\/p><\/div>\n

Fiscal Deficit Reduction Strategies under Atmanirbhar Bharat Abhiyan:<\/h2>\n
    \n
  • India\u2019s Fiscal Deficit is pegged at 3.5 % for FY21 and is expected to rise to 5 % in sharp fall of Revenue this fiscal.<\/li>\n
  • Atmanirbhar Bharat (actual cash outgo) is less than 1 % of GDP of the Country.<\/li>\n
  • Indian Government fear of Rising in Fiscal Deficit: It downgrades the International Credit Ratings as, aftermath, future Indian borrowings may get costlier.<\/li>\n
  • Why Fiscal Impact of Atmanirbhar package is less:<\/li>\n
  • This is because many of the government\u2019s proposals are *credit-focused* or is aimed at easing* liquidity concerns* for many affected sectors.<\/li>\n
  • In some of these cases, *any costs incurred will be initially covered through banks or other financial institutions and thus not result in actual cash outgo by the Centre.*<\/li>\n<\/ul>\n

    Suggested Strategy where the Fiscal Deficit may not rise further<\/h2>\n

    \nIt is when the SCB\u2019s which grant Loans on behalf of Atmanirbhar Bharat do a third party Insurance of the Tranches of Loans given, SCBs pay a premium to the third party, and in case of default, the money is given by the third party to the SCBs. A simple* Credit Default Swap* or
    \n*Collateralised Debt Obligations * by the SCBs goes a long way.
    \nThe One Percent of GDP Expenditure on Atmanirbhar Bharat results in 2.45 percent on GDP return back to the Government as the GDP Multiplier on Expenditure on Autonomous Capital Productive Expenditure is 2.45 of Indian Governments via Indian Banking led productive lending.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Revenue contraction due to COVID-19 linked lockdown amid a slowing economy would force state governments to borrow more and hence will have a higher fiscal deficit. Despite strong pressure from India Inc for large fiscal stimulus, the Modi government has primarily relied on loan guarantees and liquidity support as there is little room to relax […]<\/p>\n","protected":false},"author":1,"featured_media":1752,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[939,940,941,184,938],"class_list":["post-1751","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-atmanirbhar-package","tag-covid19-impact","tag-credit-ratings","tag-debt","tag-fiscal-impact-due-to-atmanirbhar-package"],"acf":[],"yoast_head":"\nFiscal Impact Due to Atmanirbhar Package<\/title>\n<meta name=\"description\" content=\"Revenue contraction due to COVID-19 linked lockdown amid a slowing economy would force state governments to borrow more and hence will have a higher fiscal deficit.\" \/>\n<meta name=\"robots\" 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