A cyclist rides on a deserted road in front of the Taj Mahal Hotel during a weekend lockdown imposed by the state government amidst rising Covid-19 cases in Mumbai on April 10, 2021. Photo: AFP / Punit Paranjpe

The Indian government has come up with a slew of measures to revive the Covid-19 ravaged Indian economy. The country recently suffered its worst surge in infections and deaths and has now begun lifting restrictions following a dip in the number of cases.

Finance Minister Nirmala Sitharaman announced a further widening of the emergency credit program and support for the healthcare and tourism sectors, which will cost the exchequer 6.29 trillion rupees (US$84.76 billion).

The minister said the entire fiscal stimulus would be funded by borrowings and revenue and taxpayers will not be charged a single penny.

The loan guarantee program has been expanded to 4.5 trillion rupees ($60 billion), from 3 trillion rupees. The government has also announced a credit guarantee scheme through microfinance institutions, under which loans will be provided to 2.5 million small businessmen.

The government also extended the loan guarantee program to the tourism sector, one of the worst-hit by the travel restrictions and lockdowns in the wake of the Covid outbreak last year. Those in the tourism sector will be provided with personal or working capital loans to help them discharge their liabilities and restart their businesses.

Under the scheme, the government would cover 10,700 regional-level tourist guides who have been recognized by the Tourism Ministry, and those Travel and Tourism Stakeholders that have also been recognized by the ministry under the scheme. Loans up to one million rupees will be provided to tourism stakeholders and 100,000 for tourist guides.

The government also announced a cover of 500 billion rupees for ramping up health infrastructure in smaller cities. The loan guarantee scheme would provide 75% coverage for new projects and 50% for those in expansion mode. A loan of up to one billion rupees will be given for up to three years at an interest rate capped at 7.95%.

An additional allocation of 232 billion rupees has been announced with a primary focus on pediatric care. This will be used to increase human resource capabilities by funding the hiring of medical and nursing students along with increasing the availability of ICU beds, as well as the oxygen supply at central, district and subdistrict levels.

This will also be used to finance equipment, medicine, access to teleconsultation and ambulance services. Besides child care, these funds would also be used for ramping up testing capacity and supportive diagnostics and to strengthen capacity for surveillance and genome sequencing.

Industry body the Confederation of Indian Industries has welcomed the incentives announced by the government. Its President T V Narendran said: “We are heartened by the targeted interventions announced by the government, with a special focus on health and tourism.” Extending loan guarantees will also help boost liquidity, he added.

However, Care Ratings has said that a large part of the package will work only in the medium term. And it will only boost the supply side and not help the demand side.

In its May bulletin, the Reserve Bank of India said the Covid-19 second wave had a bigger impact on aggregate demand than on aggregate supply.