Indian States Take the Lead in Stimulating Virus-Hit Economy

(Bloomberg) -- As India’s federal government weighs stimulus measures to offset the impact of the new coronavirus, states with populations as big as Brazil are taking the lead in providing support to vulnerable sections of Asia’s third-largest economy.

“So far, states have been arguably more proactive than the center in terms of rolling out fiscal measures,” Sonal Varma and Aurodeep Nandi, analysts at Nomura Holdings Inc. said in a note. “As the hit intensifies, most states will scale up fiscal measures, and lobby the central government for more transfers and/or more flexibility to borrow from the market.”

India’s top 10 states with COVID-19 cases, comprising the most populous Uttar Pradesh and the richest Maharashtra, account for about 64% of national GDP. Four of these -- Kerala, Uttar Pradesh, Karnataka and Delhi -- have announced a combined stimulus of about 650 billion rupees ($8.5 billion), according to Nomura’s calculations.

Finance Minister Nirmala Sitharaman on Tuesday eased some regulations and compliance requirements for businesses and said the government is readying an economic package that would be announced soon. Prime Minister Narendra Modi is also scheduled to address the nation at 8 p.m. in New Delhi. Economists are expecting a stimulus of as much as $30 billion from the federal government.

The stimulus so far from the states includes advance payment of pensions, expansion of rural employment and poverty alleviation programs, cash transfers to laborers and free food grains to the poor. “As the health and broader social sector is largely a state subject, a lot of the onus of spending will naturally fall on their budgets,” the Nomura analysts said.

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