 Hello and let's talk about the first installment of Finance Minister Nirmala Sitaraman's economic package. This was announced yesterday and the reaction was well underwhelming. The day before the Prime Minister announced that the total economic package would be 20 lakh crores which would be 10% of the country's GDP. This was widely celebrated despite his own announcement that this would include the previous package and liquidity injected into the system by the Reserve Bank. It was soon clear that the actual amount spent by the government would be much lesser. Finance Minister Sitaraman's package yesterday confirmed this. Here are some details. The main focus of the package seems to have been on the MSME or the Micro Small and Medium Enterprises. Collateral free loans to the tune of Rs. 3 lakh crores were announced for MSMEs. The definition of these MSMEs has also been relaxed so that more enterprises can come into that category. As part of focusing on local production, government contracts for up to Rs. 200 crores will be reserved for Indian companies. Non-banking financial companies, housing finance companies and micro-finance institutions will also benefit from a Rs. 30,000 crore special liquidity scheme. Other announcements include a 25% reduction in TDS and TCS, a reduction in EPF contributions and an extension of the date-to-file tax returns. All in all, this was a set of policies based on giving credit as opposed to putting money. All in all, this was a series of policies based on credit as opposed to putting a lot of money in people's hands leading to the question, where will the demand come from? Who is going to pay? We talk to journalist Anindya Chakravarti on this announcement. Thank you Anindya for joining us. So, we know that Finance Minister Nirmala Sitaraman is set to announce the second segment of the package today evening at 4 o'clock. But let's first talk about yesterday's announcements and before we get into the details, what do you think is the government's strategy while adopting or looking at, say, implementing or announcing these policies? I think the government is following whatever the strategy that it has always followed, which is to give round numbers. So, 20 lakh crore is a great sounding number, which they will repeat at every election meeting. Never been done ever. 10% of GDP given by India, whereas no other country has given this and no one is going to check what that amount was. And I think I was on television the same night when this announcement came and I had predicted that it won't be more than 2-2.5% of GDP, the real fiscal outgo. I might turn out to be wrong because yesterday's announcements, the total amount of fiscal cost to the government is 16 and a half thousand crores for 6 lakh crores. So, for 6 lakh crore of announcements, the total fiscal outgo is 16 and a half thousand crores. So, that 2.5% that I said might turn out to be wrong, completely wrong. Might be much less, sir. It might be 1% for all you know. So, a key aspect of this policy announcement seems to have been the MSME sector. The definition of the MSME itself has been sort of expanded. There have been given a number of other say amenities as well. So, do you see this actually translating into a huge production of jobs or say at least a retention of jobs? I think that the MSME sector was definitely facing some kind of a liquidity problem. By liquidity for our viewers, I know Mr. Modi, the Prime Minister has used it repeatedly, but most people don't know what it means. It is the availability of credit or availability of cash funding. That was a problem. There is no doubt about that. But it is also true that after you take a loan, you need a market to sell things. So, people have to have income to be able to sell things. The government needed to create jobs. It's as simple as that. On the one hand, as we discussed last time, the government is saying that we are going to push MSME because MSME creates jobs, but they have also ensured that labour laws don't have to be implemented in most of the BJP states. So, therefore, it's a higher and higher thing. I don't see MSMEs hiring more people, taking more loans. You know, the first thing that I did when I first gave up my job was to repay the economic stimulus that I had taken from ICIC, a bank to buy a car. It was a five-year economic stimulus which I had to pay back every month. So, when you get an economic stimulus, which is essentially a loan, you have to have a business decision to make and then pay it. Yes, a lot of people are in stress and they will just have to... I think they'll just keep their nose above water and say, what is it called? So, we have to survive by taking a loan. Yes, and that is an essential part which had to be done. Why the government had to do it? I don't know the RBI could have done it also because the RBI has already done it. Exactly, it has already done it. 8.04 lakh crore worth of liquidity has been already added. From the time this COVID-19 system came into place, out of that about 6.5 lakh crore has come, I think, after the lockdown, if I'm not wrong. And some of it right just before that. So, the other key aspect many commentators noted was that despite all the talk about workers and how this package would be targeted at some of these sections, there was actually nothing directly for the poorest of the poor in terms of the migrant workers, in terms of those who are struggling in the cities, for instance, there has been no concrete announcement for them. So, at the most there are benefits which transfer through second or third parties. I think that the first lot of announcements that they made was meant for them. So, the 1 lakh crore of additional expenditure and the 70,000 crore worth of bringing forward expenditure which was going to take place in any case, which is the PM, Kisan or Mandrega and also taking what lies with states and saying that this is an allocation which is, you know, the money meant for construction workers than the district development fund, none of which is actually the centre's money. So, approximately 65 to 70,000 crore was already committed. Now an additional 1 lakh crore was given, I would say for the poorest of the poor. That was targeted for the poorest of the poor. Is that enough? Well, if 80 crore people get food, cheap food for three months and if they can extend it further, then it will be much more than what they normally do get already. So, these speeches, right? Because Mr. Modi is, if anything, he is a very good communicator. He knows what language to use and if he's using English, he's not targeting the poor at all because he said land, labour, liquidity and laws. He didn't use Hindi words for this. He kept saying liquidity. Now, most middle-class people don't understand liquidity. So, for him to keep saying that word, then he said, local ke liye vocal. He did not use any Hindi term. Vocal is not something most people understand. So, his target was very clearly in this speech, the middle class, because he felt that the middle class is restive, the middle class is in trouble and small entrepreneurs are in trouble. So, the first lot of announcements have come for that. Of course, as I said, that is the same economic stimulus that I took for my car and as we have discussed in the past, we have not ever taken any economic stimulus to buy homes. The economic stimulus is essentially a lot of loans. I had expected it to be, I had said on the day of the speech that 8 lakh crore has been given by the RBI and another 5 lakh crore or odd will be issued by the government. More will be given to the, so 13 lakh crore will be dead. Now it turns out that 14 lakh crore out of the 20 lakh crore is already essentially credit out of which 16.5 thousand crore is what the government is guaranteeing. So, what is going to come next? Some middle class stuff. I'm assuming something will come. The government is obviously trying to put more cash in people's hands. So, I remember when I used to hire young people, they wanted to be on contract even when they got permanent jobs because as soon as they got a permanent job, their provident fund deduction would go, so their tax rate would not be the 10% that a consultant pays and they wanted more. They said, I don't want provident fund to be deducted because they didn't think of the future but when you told that TDS deduction, like I pay TDS, TDS is deducted on any fee that I get and when that is 25% less, it looked like I've got more but at the end of the year, I'll have to pay that because the tax liability is not going to go. My PF, which is my own money, 2% of it will come in my hand. I can spend it. It's not a mandatory saving. So, those are things I suspect there will be some more for the middle class in the next set of announcements. People said, where is this 20 lakh crore going to come from? One mustn't forget that it's very easy to do this kind of accounting. Don't forget that the government actually announced, Nirmal Sitaraman announced and the Prime Minister himself announced that 100 lakh crore will be spent on infrastructure in the next five years, by 2025. I think that was the announcement. So, at that time it was about five and a half years or so. 100 lakh crores is five times 20 lakh crores. If you can say 100 lakh crores, all that 100 lakh crores is loans. I mean, the total amount of credit dispersed by the banking system in 2019-20 additional credit is 10 lakh crore. So, that is the stimulus in any case. So, this would have happened in any case. I see nothing extraordinary, but the government has asked for 4.2 lakh crore more compared to what its initial public borrowing plan was. So, that has been increased by 4.2 lakh crores. But I suspect that it will be short of at least two and a half lakh crore of taxes, not less than that. Whether it's GST and stuff like that, it's going to be short. You know, even though excise duty on petrol diesel has been increased, no cars were out on the road. So, I think the total earnings of centre and states on petrol diesel is also lower. We know alcohol is a great thing for states and they were going to earn money but apparently because of the fear of social distancing. So, I'm saying that therefore there's going to be a two and a half to three lakh crore shortfall in the centre's tax earnings and they're asking for 4.2 lakh crore or more. So, one can assume not more than one and a half to two lakh crore additional is their plan because this was on the ninth of May. So, it's not far back. That is virtually nothing. That is virtually nothing. And I think they're going to stop spending a lot of things that they had initially planned to spend. 30 lakh crore is the total outlay for the budget this year for 2021. It's possible they'll end up with much lesser and end up spending just 27 lakh crore. And that is how they'll open up some space to direct some kind of fiscal spending. But the next round today could be, hopefully will be for the middle class because I'm one of those people, I've actually not lost out because of the lockdown at all. I have been essentially a misanthrope practicing social distancing for a couple of years. But I think the middle class is in deep trouble right now. So, what we also see is that fundamentally there is no change in the way the government is really thinking or this crisis is not about any massive transformation as far as economic or financial policies concerned unlike say certain other countries which have changed track, decided to say change and see even what some experts have suggested that this is an opportunity to sort of change the way of thinking. We've talked about the possibility of printing more money for instance. All that is basically nothing is in the picture as of now. You know, they already printed money when they took the RBI's reserves because that has to be always as a senior RBI executive, former executive told me that that amounts to printing money. It will have to be filled up by printing money. So, it's not as if the government has not printed additional money. The question is when you increase liquidity in this form, how do you do it? What is the route through which it will be increased? I personally think that this government, more than any other government, maybe Niragandhi was somewhat like that, takes every single step based on number of votes that are going to become. So, when we look at the economy as specialists or as social scientists or as journalists, commentators, we think of good for everyone or development and stuff like that. I don't think the government thinks of it in that manner at all. What we are seeing is fundamental structural changes in the polity. This was bound to happen. Liberalization was going to lead us towards authoritarianism sooner or later. That authoritarianism is now in our social body and that is a significant change and makes some changes in the way the economy functions over the medium term or the long run as well. I think that is bound to happen. Thank you Anand. You are so much talking to us. Thank you Prashant. That's all we have in this episode. Let's talk. We will be back tomorrow with the latest news developments of the day. Until then, keep watching NewsClick.