Prime Minister Modi's encouragement is little seen to boost demand in the economy

NEW DELHI: Equity strategists and economists concerned that Prime Minister Narendra Modi's $ 265 billion stimulus to dampen the economy during the coronavirus pandemic has focused on increasing liquidity rather than demand in the fragile economy .

Almost half of the bailout package, equivalent to 10% of gross domestic product (GDP), comprises monetary measures announced since February, while the finance minister offered $ 72 billion in lines of credit to small companies, banks on Wednesday. the shade and electricity distributors.

Stock futures on the NSE Nifty 50 index traded in Singapore fell 1.5% on Thursday after stocks in Asia's third-largest economy increased the most in nearly two weeks in the day before session on optimism about the rescue package.

Here is what equity analysts and economists say about India's stimulus:

No further demand boost

Surendra Goyal and Vijit Jain, equity analysts at Citigroup Inc:

There was still no significant increase in demand, which the equity markets expected: to maintain our 10k Nifty target.

The finance minister's announcements on Wednesday focused on relief for the MSMEs, NBFCs and utilities sector, primarily liquidity is the focus.

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Not a 1991 time

Kunal Kundu, economist at Societe Generale SA:

Expectations were high that it could be the time for this government in 1991, when the economic crisis of that time unleashed a major drive for reform that finally put the economy on a new growth path. Kundu said that while a few more announcements are likely to follow, the multiple liquidity measures and hardly any additional fiscal spending did not meet expectations.

Failure to address the needs of the most vulnerable sectors of society, that is, migrant workers and employees of the unorganized sector, will probably prolong the economic pain, delay the recovery of aggregate demand and could worsen the situation of labor supply.

Looking for more balance

Mahesh Nandurkar and Abhinav Sinha, equity analysts at Jefferies Financial Group Inc .:

Tranche 1 of the new government package has successfully postponed a large portion of the potential NPLs for the MSME and NBFC segments from fiscal year 21 to fiscal year 22 with minimal impact in the fiscal fiscal year.

More demand-side measures are likely to be announced in the coming days, reducing the downside risk of the market.

Joseph Thomas, Head of Research at Emkay Wealth Management:

“The measures are more on the supply side and there is very little on the demand side. Probably future announcements may contain a more balanced coverage of the secondary factors of demand and supply.

Demand side factors generally tend to work faster as it is directly oriented towards the consumption unit.