Finance Minister announces economic stimulus to boost demand by

₹ 73,000 Crores
• This is the second fiscal stimulus package after the Rs 20 lakh crore ‘Aatmanirbhar Bharat’
stimulus unveiled in May to tackle the economic fallout of COVID-19 pandemic. Second Fiscal
Stimulus was necessitated due to factors such as rise in inflation, bleak employment scenario and
no recovery in the Index of Industrial Production (IIP) amongst others.

• Central government and central government enterprise employees can choose to either lapse their
LTA this financial year or get the benefit in cash equal to leave encashment plus three times ticket
fare. ₹10,000 worth of festival advance will be available for all such employees. State governments
and the private sector can also do the same.

• For an infrastructure push, a ₹12,000 crore zero-interest 50-year loan to the states is being given
and another ₹25,000 crore as a capital expenditure boost to the existing ₹4.13 trillion already
announced in Budget 2020-21. The value of these measures is about ₹1 trillion.

• On its part, the Centre has also decided to allocate ₹25,000 crore over and above the capital
expenditure of ₹4.13-lakh crore. This will be spent mainly on road, defence, water supply and
urban development.

• Credit rating agency Moody’s said on October 14 that the second round of fiscal stimulus will
provide limited support to growth and highlights the country’s credit-negative fiscal constraints. It
also observed that in total, the two rounds of stimulus bring the government’s direct spending on
coronavirus-related fiscal support to around 1.2% of GDP. While Moody’s has forecast growth to
rebound to 10.6% in 2021-22, due to base effects and a gradual normalisation in economic activity,
it expects growth to settle around 6% over the medium term, with downside risks that partly arise
from ‘ongoing stress’ within India’s financial system.

• The State Bank of India's Ecowrap pointed that the announcement is set to push the fiscal deficit to
9.5 percent of the GDP.

References:https://www.livemint.com/opinion/columns/a-pragmatic-fiscal-stimulus-package-
that-nudges-households-to-spend-11602559368063.html

https://www.thehindu.com/business/latest-stimulus-to-have-minimal-growth-
impact/article32865501.ece