Connect with us

Economy & Market

Dissecting the Indian stimulus package

Published

on

Shares

Covid-19 has taken the economy off the cliff; recent enquiry by most of the banks and economists have put a tag of 3 to 5 per cent drop in the GDP for the full year, these numbers for the moment are not improving after the stimulus but actually deteriorating. Did something go wrong in the stimulus?

Well first of all any stimulus package has two components, the monetary component, which acts on the supply side and a fiscal component, which acts on the demand side as when additional spend items from the side of the government happens due to additional cash deployed from the government, the economic activities see a fresh lease of life. But this would mean additional cash spending that can only come from additional loans taken by the government over and above the existing ones at play.

Take the US stimulus, the first tranche of $2 trillion, which is 10 per cent of GDP and it is a great way to see how the stimulus works. Half of this is actually monetary in nature, these are loans, $500 billion for large businesses and $367 billion for small businesses and $150 billion to State and local governments. This makes 5 per cent of GDP. It will strengthen the supply side. The balance 5 per cent of GDP is actually cash transfers directly to the people ($1,200 for each adult and $500 for each child).

The whole stimulus package is worth one paragraph. The fiscal action of actually spending by the government is done though cash directly to the populace who can spend. But the Indian stimulus consisting of several tranches makes it difficult to dissect what is fiscal and what is monetary and what is reallocation of existing resources.

Let us take the overall numbers of the Indian stimulus package. The overall pledge of Rs 20 lakh crore looks just the kind of stimulus that India actually needs. But the stimulus is directed to monetary release, which by the way has been tried by RBI for the past several months to stimulate supply but the transmission channels showed no traction. The total pledge by the government is a staggering Rs 11.43 lakh crore and adding Rs 40,000 crore of MGNREGS it takes the tally to Rs 11.83 lakh crore of pledges, while the balance of the Rs 20 lakh crore is reallocation of resources.

But surprisingly, the real cash outgo is just Rs 1.37 lakh crore, this is not even 1 per cent of GDP.

The real cash outflow is what really matters now. Think of the US stimulus and the immediate cash outflow was 5 per cent of the GDP as direct payments to the people; the business loans and those to the State governments also released a significant chunk of the funds immediately (at least the ones to the airlines and hospitality sector was immediate). If I tried to dissect the myriad of initiatives that got added in the tranches like the Coal evacuation initiatives, that would add another Rs 50,000 crore as a fiscal stimulus taking the tally to Rs 2.5 lakh crore.

So the 10 per cent stimulus effectively comes to less than 1 per cent of actual cash release. This is the amount that the government is going to draw additional to what it is already committed to draw this year. This is all that will change in terms of the government’s fiscal position.

Isn’t it too little and how much of that is going to the most distressed people, the migrants, who have returned to their homeland? Well, giving food to them is the right thing to do, but is it a stimulus, that is a million dollar question; most of the purported items in the stimulus appear to be reallocation of resources.

ABOUT THE AUTHOR: Procyon Mukherjee works as Chief Procurement Officer at LafargeHolcim India. The ideas presented are his personal and have no connection to the beliefs of the company where he works.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Concrete

15th Cement EXPO: A Step Forward in Cement Innovation

Published

on

By

Shares

Mumbai

Following the immense success of the 14th Cement EXPO, held on December 14-15, 2023, at the Manekshaw Centre, New Delhi, the next edition of this premier event is set to take place in March 2025. The 15th Cement EXPO will be hosted at Yashobhoomi, Delhi, on 12th and 13th November 2025.

Meanwhile, the Cement Expo Forum 2025 is scheduled for 5th and 6th March 2025 at Taj Krishna in Hyderabad. This exciting 3-in-1 event, organised by FIRST Construction Council (FCC) and Indian Cement Review (ICR), will bring together industry leaders, innovators, and stakeholders to discuss the future of the cement sector.

Building on the Success of the 14th Cement EXPO

The 14th Cement EXPO was widely praised for its strong participation, attracting over 1,500 senior managers and decision-makers from across the cement industry. The event was inaugurated by Dr. Vibha Dhawan, Director General of TERI, and Ali Emir Adiguzel, Founder and Director of the World Cement Association, alongside Pratap Padode, Founder of FIRST Construction Council (FCC). The two-tiered exhibition space featured cutting-edge products and innovations from top companies within the cement industry’s supply chain.

The event also garnered significant support from key government bodies, including the Ministry of Road Transport and Highways, Government e-Marketplace (GeM), and the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India (GoI).

Recognition and Excellence in the Cement Industry

The 7th Indian Cement Review Awards celebrated excellence by presenting awards to 11 companies in various categories, recognising their contributions to growth and innovation within the industry. Notably, Parth Jindal, Managing Director of JSW Cement, was honoured with the prestigious Indian Cement Review – Person of the Year Award 2023. Meanwhile, Vinita Singhania, Vice Chairman and Managing Director of JK Lakshmi Cement Ltd, received the Lifetime Achievement Award for her outstanding leadership and contributions to the sector.

A Vision for Sustainability

With the theme of “Driving Sustainability Through Technology,” the 9th Indian Cement Review Conference hosted thought-provoking discussions and presentations, highlighting the industry’s commitment to adopting innovative, sustainable practices. The conference served as a platform for dialogue on the latest technological advancements aimed at transforming the cement sector, addressing key challenges, and fostering growth.

What to Expect from Cement EXPO 2025

The 15th Cement EXPO, along with the 10th Indian Cement Review Conference and the 8th Indian Cement Review Awards, is set to be even bigger and more impactful than the 2023 edition. With an expanded exhibition space, greater participation, and more in-depth discussions, the 2025 event will continue to drive the industry forward. This 3-in-1 event promises to be a pivotal moment in the ongoing transformation of the cement sector.

As the industry evolves, the 15th Cement EXPO 2025 will serve as a crucial platform for showcasing innovations, discussing emerging trends, and forging new partnerships to shape the future of cement and construction.

For more details:

Cement Expo Forum 2025: https://cementexpo.in/forum

15th Cement Expo 2025: https://cementexpo.in/

FOR CONFERENCE SPONSORSHIPS

Sheetal Talreja

Mob: +91 842 2874 030

Email: sheetal@IndianCementReview.com

FOR EXHIBITION/SPONSORSHIPS

Sujoy Gomes

Mob: +91 865 7795 881

Email: Sujoy.g@ASAPPinfoGlobal.com

FOR SPONSORSHIPS

Ratan Rajbhar

Mob: +91 842 2874 021

Email: ratan.r@ASAPPinfoGlobal.com

Continue Reading

Concrete

Construction sector growth slows to 8-10% for FY2025: ICRA

Published

on

By

Shares

The revenue growth for construction companies in FY2025 is projected at 8-10 per cent, down from the earlier estimate of 12-15 per cent, according to ICRA. This marks the slowest growth in three years, driven by factors such as the Model Code of Conduct in Q1, prolonged monsoons, and milestone-based billing in Q2, particularly affecting road-focused players.
ICRA’s analysis of 19 companies with a combined turnover of Rs.1.28 trillion in FY2024 shows modest revenue growth of 1.5 per cent YoY in H1 FY2025. While execution is expected to improve in H2, FY2025 growth remains below the historical CAGR of ~15 per cent (FY2018-FY2024).
Order inflows in urban transport, water and sewage projects are healthy, but road-focused entities face challenges due to muted inflows and high competition. Operating margins are projected to remain range-bound at 10.5-11 per cent, with debt levels rising to manage working capital needs, though debt coverage metrics remain stable.

Continue Reading

Concrete

SANY India expands Pune factory to boost production capacity

Published

on

By

Shares

SANY India inaugurated a cutting-edge factory expansion at its 90-acre Pune facility, elevating its production capacity to over 14,000 units annually, alongside a robust fabrication capacity of 100,000 metric tonnes.

The advanced facility reinforces SANY’s commitment to ‘Make in India’ by enhancing localised manufacturing and supporting global exports. Chairman Xiang Wenbo highlighted the strategic importance of India as a global hub, while Vice Chairman Deepak Garg emphasised the expansion’s role in driving innovation and infrastructure development. This investment enhances efficiency, reduces timelines, and strengthens SANY’s leadership in the construction equipment sector.

 

Continue Reading

Trending News

This will close in 5 seconds

SUBSCRIBE TO THE NEWSLETTER

 

Don't miss out on valuable insights and opportunities to connect with like minded professionals.

 


    This will close in 0 seconds