On May 12, Prime Minister Narendra Modi announced a special economic stimulus package worth Rs 20 lakh crore to help revive the economy and make India self-reliant in the wake of the economic carnage caused by COVID-19.
The package, worth about 10 per cent of India’s GDP, is touted as being among the largest in the world. As a percentage of GDP, India’s announced spending on COVID-19 until now has been low, at less than one cent, a fact raised by Nobel Prize winning economist Abhijit Banerjee. However, with the package announced by PM Modi (and set to be elaborated on the coming days by Finance Minister Nirmala Sitharaman), India is set to have the fifth-largest COVID-19 bailout package among major economies, in terms of spending as share of GDP.
Based on data compiled by economist Ceyhun Elgin in the COVID-19 Economic Stimulus Index (CESI), Modi’s proposed stimulus package—worth about 10 per cent of GDP—would be the fifth-largest among G-20 economies in terms of spending as a percentage of GDP.
Japan leads the list by spending 21.1 per cent of GDP on COVID-19 related economic stimulus measures, followed by the United States (13.3 per cent), Australia (10.8 per cent) and Germany (10.7 per cent).
However, among economies as a whole, India's 20 lakh crore bailout package would tie with Hong Kong at the 19th place, as per Elgin's list (which is updated up to May 10). Smaller countries like Luxembourg and Belgium have spent a fifth of their GDP on COVID-19 related stimulus measures, at 20.7 per cent and 19.2 per cent respectively.
In terms of overall amount, India’s coming package will be worth about $265 billion. By comparison, the United States has committed $2.7 trillion in total through three phases of congressional stimulus packages (with a fourth phase being debated), Japan; which has compiled a $1.1 trillion recovery package (and plans for further spending); Germany, with a €750 billion package (around $815 billion); Italy, also with a €750 billion package; the United Kingdom with a £100 billion package of immediate fiscal spending (and 330 billion of deferred payments like tax breaks and loan guarantees).
The EU as a whole, via initiatives by its member states and core organs, has a total fiscal response of €3.2 trillion ($3.5 trillion).
India had initially committed 1.7 lakh crore ($22.6 billion) in COVID-19 related relief measures, followed by 3.7 lakh crore of stimulus measures by the RBI. The 20 lakh crore figured cited by PM Modi includes these measures, which put together, would equal up to 10 per cent of India’s roughly 200 lakh crore economy.
As a comparison, India spent approximately 1.28 per cent of GDP on healthcare in FY18.
The details of the upcoming relief package will be key as these will show how much of the amount will be immediate fiscal relief measures (like direct cash transfers) and how much will be in the form of possible tax breaks, deferred payments or liquidity infusion measures.
As of May 12, India had 70,756 cases of COVID-19 in total, with 2,293. Of the total cases, 22,454 have been cured/discharged. According to a COVID-19 case tracker by the Centre for Systems Science and Engineering at Johns Hopkins University, India has the 12th most total confirmed cases of COVID-19 in the world, currently trailing behind China, the country where the outbreak began.