‘Second round of stimulus package is not necessary’
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August 17, 2022

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WEDNESDAY, AUGUST 17, 2022
‘Second round of stimulus package is not necessary’

Panorama

Dr Kazi Iqbal
17 February, 2021, 11:30 am
Last modified: 17 February, 2021, 11:30 am

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‘Second round of stimulus package is not necessary’

The Centre for Policy Dialogue (CPD) has recommended formulation of a new stimulus package for the small businesses, which are struggling to recover from the coronavirus pandemic impact. The Business Standard reached out to one economist and one industry leader to have their takes on CPD’s recommendations.

Dr Kazi Iqbal
17 February, 2021, 11:30 am
Last modified: 17 February, 2021, 11:30 am
‘Second round of stimulus package is not necessary’

Soon after the pandemic began, we conducted research from BIDS. Since high-frequency GDP data cannot be found, we used some other indicators – one of them was electricity consumption. In terms of electricity consumption, we found that during the first three months of lockdown, the consumption fell – which we assumed happened at the industrial level. Since offices were shut, this fall in consumption cannot be at the household level. 

The consumption of electricity, however, increased sharply from the second month of lockdown. It made us realise that a V shape recovery actually began since the very second month of the lockdown. When the garments started to open up, and workers returned to the city, our recovery began right there –thanks to our garments and larger industries. 

However, our SMEs and the informal sector remained severely impacted. 

One of the reasons for their suffering was the absence of demand for the products – especially in the service sector. Our restaurants were shut, and productions stopped in SMEs and other smaller manufacturing companies. It happened due to the shutdown imposed by the government. On the other hand, the demands also dried up. To sum up, smaller industries were heavily impacted. 

Now the question is how much these smaller industries improved over the months. As per our (BIDS) research, 60% of the smaller businessmen told us that they would recover in six months if lockdown was withdrawn. The lockdown was withdrawn soon after our study, but we do not have detailed information on how much they recovered after this. 

However, at present, the overall economy is functioning quite smoothly. Most of the businesses are now in operation. We believe around 80%-90% of the economy is on their feet. So, we do not think another round of stimulus packages is necessary. We instead need to focus on the first round of the stimulus package – why those were not delivered properly. 

One major reason was that the stimulus was distributed through banks, and reaching smaller businesses through the bank is not easy. If you want to reach them, you need NGOs like PKSF and others. We have been asking from the beginning to disburse the stimulus package through the NGOs since they are scattered at the grass-root level. We believe it would have been wiser to utilise them in stimulus package distribution. 

To sum up, the larger firms have recovered, and the smaller firms are on their way to recovery. We cannot say for sure that they recovered; we do not have data yet. But from observation, we can say that they are on their way to recovery. And I believe we are not in a situation that requires the second round of stimulus packages. Besides, if the recovery is K shaped or not, it is not well tested. 


Dr Kazi Iqbal is a Senior Research Fellow, BIDS

Economy / Features / Top News

stimulus package / second round / Economic recovery / Covid -19

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