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Thursday 9 April 2020

Stimulus ‘discreet, considered’, says Sitharaman about budget

'We kept the macroeconomic fundamentals in mind and made sure that the necessary stimulus which was the demand of the time,' said the finance minister

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In India

Lockdown may be extended with ‘change in work style’

While the parties were near unanimous about extending the lockdown, Prime Minister Narendra Modi raised the concerns of DBT and emphasised the need to work differently to run the economy

Addressing concerns of the industry that opined after the Budget 2020-21 speech that there was no booster dose, Finance Minister Nirmala Sitharaman said today, “Based on the experiences that we had in the last round of government trying to provide stimulus, We’ve essentially made sure that we are doing it in a very discreet and considered manner.”

Sitharaman was in Mumbai today, as she had announced on 4 February she would be as part of her tour of three Indian cities to interact with different players in the economy.

“We kept the macroeconomic fundamentals in mind and made sure that the necessary stimulus which was the demand of the time, both for increasing consumption and also for ensuring investments in long-term asset building as a means to providing stimulus will be taken up,” she added.

Pointing out where the stimulus lies, the minister said that the rural and farm sector had got attention through the 16-point agenda. She said start-ups had got a fillip and infrastructure investments had got her attention too. “The remedy is a considered remedy. I’m sure discerning people will be able to see why it is so,” she said.

A stimulus for banks or a bail-in

The Finance Ministry is working on the much-debated Financial Resolution and Deposit Insurance (FRDI) Bill. Finance Minister Nirmala Sitharaman, sharing this information, said on Friday that work on the bill was going on but it was not yet decided when it would be introduced in Parliament.

The Finance Minister’s statement is significant in view of the five-fold increase in deposit insurance and recent changes in the bankruptcy law. It also includes a bankruptcy solution for financial institutions. Sitharaman said, “We are working on the FRDI Bill, but cannot tell when it will be tabled in Parliament.”

The FRDI Bill will offer a bail-in clause to banks. This many fear will not be in the depositor’s interest. The budget has increased the deposit insurance five-fold to Rs 5 lakh.

The minister welcomed the announcement of liquidity measures by the Reserve Bank for retail customers in general and MSMEs and realty companies in particular. The central bank announced these measures in its sixth bi-monthly monetary review for the current fiscal on Thursday.

There will be a provision under the FRDI Bill in which banks have to first use their resources to recover. Many fear that this bill will harm depositors. Insurance deposited in the budget has been doubled from Rs 1 lakh to Rs 5 lakh.

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