The finance minister recently announced a third stimulus package — Atmanirbhar Bharat 3.0 — worth Rs 2.65 lakh crore. Like the previous two packages, a lot is notionally allocated as additional credit for willing borrowers (and lenders). These transactions are not under the direct control of North Block. They do not constitute direct benefits to consumers to boost demand. In the schemes announced, apart from the effects of a larger fertilizer subsidy to farmers and income-tax relief to homebuyers, the only direct benefit to households is worth Rs 10,000 crore in the form of additional allocation for the MGNREGA job creation scheme and the Pradhan Mantri Gram Sadak Yojana programme.
The Centre’s approach has been to continue to depend on credit availability to drive recovery and growth. However, credit off-take from the banking system was poor last year and this has dropped further in the first half of the current year to 5.1 per cent compared to 8.6 per cent in the first half of 2019-20. Fresh credit was mainly allocated for personal loans and agriculture. Non-food credit growth was alarmingly low. The government has to understand that demand creates additional output and employment. It is not the other way round.
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