Prime Minister Narendra Modi announced the INR. 20 lakh crore package termed as AtmaNirbharBharat Abhiyan (ANBA) which Finance Minister, Nirmala Sitharaman elaborately covered in five parts broadly focusing onemergency working capital facilities for businesses including MSMEs, special liquidity window for NBFCs, HFCs and MFIs. Partial guarantee schemes for liabilities of NBFCs, liquidity injection for Discoms, housing CLSS MIG, additional credit through KCC, Agricultural Infra fund, additional MGNREGS allocation, plans on reforms to fast-track investment, TDS cut etc.

However, what they missed out was relief for the hotels, restaurants, transport, communication& services etc. Service sector covered under the relief measures were real estate and financing. Service sector is expected to contribute 55.3% to the gross value added (GVA) in 2019-2020 and was expected to grow at 6.9% compared to the 2018-19. Of this 55.3%, 18.3% is contributed by Trade, hotels, transport, communication & services related to broadcasting, 21.3% by Financial, real estate & professional services and 15.6% by public administration, defence & other services (Source: Economic Survey 2019-2020)

The reason emphasising this is because service sector is our main growth engine and as the financial sector is burdened with extended moratorium, forced lending norms, longer recognition of bad loans, and financial institutions are witnessing higher bounce rates.in certain customer lending segments, delayed IBC processes etc. This might result in future lossesfor banks and financial institutions which will be recognised in FY2021-2022. Banks are wary of lending and this can be observed in the dismal non-food bank credit growth of 6.46%y-o-y (8 May 2020). NBFCs are also being cautious despitethe confidence boosting measure of liquidity infusion through a special liquidity scheme worth INR.300 billion and INR.450 billion worth of partial credit guarantee schemes in NBFC, HFCs and MFIs. Hence, growth in lending is expected to remain muted and one can rule out the contribution of growth from the financial sector for the near to mid-term.

Now let us discuss the real estate sector, home sales witnessed a decline of 30% in Q1 2020, as home buyers delayed their purchase decisions owing to the uncertainty due to the Covid-19 health pandemic. Real estate developers have been reeling under financial stress since long and developers are attempting to offload their inventory through attractive offerings. For example, a large listed real estate developer is offering 10% down payment and the remainder 90% payment upon receipt of occupation certificate. In the commercial real estate sector, malls - shops, restaurants, cinema halls have been closed for the past 60

odd days, many tenants have invoked the force majeure clause. Hence, rental collection at the commercial space is dismal. Demand for both commercial and housing is also muted. Although, the announcement to extend project completion deadlines by six months for developers provides a certain quantum of relief it is not going to propel growth. So one can rule out growth expectations from boththe financial and real estatesegments.

Now, coming to manufacturing, monthly manufacturing in March 2020 was down 20.33%y-o-y, unemployment rate was at 23.52% in April 2020. Corporate houses have postponed their capital expenditure plans, are witnessing salary cuts, layoffs, and have large inventory holdings. Corporates are cautious to begin manufacturing until inventory holdings are sold or disposed-off.

On the consumer front, consumers are postponing discretionary goods consumption. Hence, discretionary goods manufacturing might revive very slowly.

Another issue at hand is that migrant labourers have returned to their villages and towns. I wonder, how one will function with a reduced labour force especially where migrant labour is largely responsible for plying city cabs, domestic help, food and, product delivery etc. With them not in the picture, how will the workforce be replaced. The ANBA is futuristic, largely focusing on the supply-side, with high dependence on implementation.

Given these circumstances, How ANBA will propel demand and curb economic damage?

- Jaslene Bawa, Assistant Professor – Finance

*Views expressed are personal.

(Source: https://bfsi.economictimes.indiatimes.com/blog/atmanirbhar-bharat-package-will-it-propel-demand-and-curb-economic-damage/4352)