NEW DELHI: Finance minister Nirmala Sitharaman said on Sunday the government consciously preferred a route aimed at empowering people rather than doling out cash because it felt that it was better suited to deal with the emergency that the Covid-19 pandemic had triggered.
Talking to TOI after shortly after announcing the last tranche of the Atmanirbhar Bharat package on Sunday, she said that while the government did initially rush money to the most vulnerable section, it felt that the long-term economic consequences of the crisis would be better mitigated by enhancing liquidity as that would help with the reopening of the economy, ensure viability of economic enterprises, and ensure protection of jobs while restoring demand.
The FM also said that the design of the “package” is in line with approach, strengthened under PM Modi, to privilege empowerment over one-time cash handouts, even as she emphasised that the government has energetically provided instant cash assistance through direct benefit transfers to the most vulnerable and needy.
“The fact is money into people’s hands can be in several forms and what we have done is to give it through that route of creation of demand for businesses to get triggered. So we are looking at a way where there so many different ripple effects, multiplier effects which will trigger the economy,” Sitharaman said while elaborating on the government’s plans to provide working capital loans and funds for NBFCs.
The FM also said that the government’s approach was influenced by the experience of the 2008 financial crisis where an economic stimulus based on careless lending led to a bad loans crisis, double-digit inflation with no gains for the economy.
“Many of the 2008 steps that they (UPA) took to help the economy, they didn’t wind down, they didn’t shut, they left it. Food inflation touched 10%. These are some of the examples through which I have learned a lot of what you should not do as an FM,” Sitharaman said while detailing the efforts that went into devising the package.
The FM said banks have informed her that several loans have been sanctioned but businesses have told the lenders that they will get them when the lockdown is lifted and work restarts.
“Disbursal hasn’t happened but sanction has happened but the money is still with the bank. Now, if the lockdown is lifted and businesses come all right now you release the money, automatically that money will reach the ground,” the FM said while responding to a question on banks reluctance to lend and park the funds approved by the government with the RBI.