Thursday, March 5, 2009

Stimulus Plans Update

The economic stimulus measures consist of two parts - credit and monetary policy related financial efforts (bank injections, buying assets, loan guarantees etc) and fiscal efforts aimed at consumers and firms (public spending on goods and services, tax cuts, spending etc). Dani Rodrik points to nice summation of the stimulus packages announced by 30 major economies of the world here and here.

The Indian fiscal stimulus figure of $4 bn (or Rs 20,000 Cr ) is not correct, as it does not include the massive doses of duty reliefs given, estimated at anywhere between Rs 50,000 Cr and Rs 80,000 Cr (or $10-16 bn). Even with this, as a proportion of the GDP, this is one of the smallerst among the bigger economies. The Europeans have been parsimonious with their stimulus measures, understandable given their problems with the EMU Stability Pact and the feeling that their financial markets are not as exposed as the American markets. However, among the fiscally strong East Asians, except for South Korea, Indonesia and Malaysia, the others have loosened their purse strings considerably.

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