India has unveiled a multibillion-dollar plan to boost consumer spending in an economy struggling under the weight of a spiraling number of coronavirus cases.
In a news conference on Monday (Oct. 12) in New Delhi, Finance Minister Nirmala Sitharaman laid out plans by the federal government to pump $6.6 billion into the sagging Indian economy through a range of spending measures, Bloomberg reports.
As the centerpiece of the program, the government will shell out $1.6 billion in advances and allowances to federal employees, who would then be required to spend the extra pay on nonessential goods before the end of March.
“Measures by the government to stimulate demand must not burden the common citizen with future inflation,” Sitharaman said. “We also kept in mind that it must not put government debt on an unsustainable path. Today’s solution must not cause tomorrow’s problem.”
India’s finance chief also outlined plans for billions in infrastructure spending. The government will spend $3.4 billion on a range of major projects, from defense infrastructure and roads to water supply, the news agency reported. In addition, Indian states can apply for more than $1.6 billion in 50-year, interest free-loans to take on their own capital projects.
Still, at least one analyst said the extra spending, while helpful, is not likely to have a dramatic impact. “We do not expect these schemes to be a game-changer, and may only boost demand at the margin,” Teresa John, an economist at Nirmal Bang Equities Pvt. in Mumbai, told Bloomberg.
The Indian government’s announcement comes as it struggles to contain the spread of COVID-19, having first announced sweeping lockdown measures in March. The country’s caseload surged past the seven million mark on Sunday (Oct. 11), making it second only to the United States in the overall number of cases, albeit with a much larger population.
Indian health ministry officials also reported 74,383 new infections from Saturday to Sunday, with a surge of infections in southern states coming even as numbers drop in the country’s west, Reuters reports.