More than half of Modi’s Atmanirbhar Bharat 3.0 stimulus package benefits can’t be reaped this fiscal

Finance Minister Nirmala Sitharaman, on Thursday, announced Atmanirbhar Bharat 3.0 package worth Rs 2.65 lakh crore ahead of Diwali, however, India is expected to reap benefits of less than half of this amount in the remainder of the current fiscal year. An additional total outlay in the range of Rs 70,000 crore to Rs 1.2 lakh crore to be undertaken in the remainder of FY21, out of which Rs 30,000 cr is spent only on fertilizers subsidy, said a report by Care Ratings. The report added that the PLI scheme for Rs 1.36 lakh crore is performance-based and spread over 5 years’ time and hence no expenditure can be expected this year.

Further, the allocation for NIIF and EXIM Bank may also not be done this year and more likely to be allocated next year. Similarly, the research and development expenses would be spread over time and can go to next year. In addition, the allocation of subsidy on fertilizers would not be incurred this year as data up to September shows that out of the allocation of Rs 71,345 crore, the government has spent 78 per cent or Rs 55,406 crore, which was 70 per cent last year. Hence, the excess spent this year is around Rs 5,500-6,000 crore. It is expected that a maximum of Rs 30,000 crore could be incurred this year as the sowing period will prevail for only another 3-4 weeks.

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Meanwhile, Care Ratings had earlier estimated fiscal deficit to be at 9 per cent of GDP in FY21. However, on account of the additional spending announced by the government, it is now estimated that the fiscal deficit may widen by 0.35-0.5 per cent of GDP, assuming Rs 30,000 cr is spent on fertilizer subsidy. Also, if only Rs 6,000 crore was spent on fertilizer subsidy, the deficit would increase by 0.25 per cent. It is to be noted that the government has so far rolled out measures worth Rs 29,87641 crore to provide a cushion to the economy amid the coronavirus pandemic-led disruptions.