India country-specific exchange traded funds surged Tuesday after Prime Minister Narendra Modi announced a 20 trillion rupee aid package to bolster the beleaguered economy following the coronavirus pandemic.
Modi announced a relief package totaling 20 trillion rupees, or $265 billion, to help bring the economy back on its feet after weeks of stay-at-home lockdown measures across the country to contain the COVID-19 outbreak, Bloomberg reports.
“This economic package will be a crucial link in the creation of a self-reliant India,” Modi said.
The fiscal spending plans, along with tax breaks for new plants and incentives for overseas companies, could help lure back investors and stop the coronavirus pandemic from continuing to destroy the economy.
Asia’s third-largest economy is spiraling down toward its first full-year contraction in four decades, with an estimated 122 million people out of a job in April and consumer demand disappearing in a time of austerity.
“The package is an announced intention with no details,” Nilanjan Mukhopadhyay, who has written Modi’s biography, told Bloomberg. “The effort is to ensure that the attention is not so much on the virus but steps that the government is taking. The strategy seems to be to control the headline.”
Modi’s administration has been censured for its sustained lockdown measures since the end of March, especially its toll on India’s poor. The movement of millions of migrant workers between the cities where they had jobs to their homes in rural villages, along with their reluctance to return, have been a major sticking point.
The aid package announcement came after market hours, bolstering SGX Nifty futures. However, bond yields may rise on fears of a higher budget gap to pay for the economic package.
“The magnitude of the package is bigger than expected,” Abhimanyu Sofat, head of research at IIFL Securities Ltd, told Bloomberg. “The funding of this huge amount is now the key focus, and bonds may see a sharp reaction.”
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