The stock market tumbled Monday and the government came under heavy fire from both economic analysts and rival political parties who said its rescue package unveiled over five days was a poorly conceived damp squib that would do nothing to revive the economy in the short run.

Former finance minister P. Chidambaram also accused the government of fudging figures and repackaging items already provided for in the annual budget. He said the additional spending of Rs 1,86,650 crore added up to only 0.91 per cent of GDP and not the 10 per cent stimulus the government had promised.

Chidambaram lashed out at the government, saying the, “fiscal stimulus will be totally inadequate given the gravity of the economic crisis and the dire situation in which people find themselves.”

The former finance minister also savaged the government’s financial package, saying it, “left many sections high and dry,” including those who needed it the most, like the bottom half of the population, migrant and daily wage workers, farmers and landless labourers.

Others left out, said Chidambaram, included workers who have been laid off or retrenched, MSMEs, “7-crore shopkeepers” and “lower-middle-class families who have run out of cash and are forced to borrow”.

Chidambaram demanded a revised package, “of not less than Rs 10 lakh crore of real additional expenditure equivalent to 10 per cent of GDP”.

Goldman Sachs scathing

Reactions from the financial world were equally scathing and financial giant Goldman Sachs grimly predicted that India would experience its worst ever recession and that real GDP would fall by 5 per cent in the 2020-21 fiscal year. Even more alarmingly, it said GDP would be slashed by 45 per cent in the second quarter when the full impact of the Covid-19 pandemic would take an immense toll.

Goldman and other analysts pointed out that the government’s rescue package appeared to consist largely of medium-term measures that wouldn’t help to pull the economy back from the brink by reviving demand which will be crucial in the coming months.

Sensex plummets

The Sensex dived 1,069 points (3.44 per cent) on Monday, driven down by a combination of factors including the extension of the lockdown and also the highly negative reaction to the government’s revival package. Hardest hit was the financial sector. International markets however, climbed after news that Moderna, which is fast-tracking its vaccine development, reported favourable results.

Investment management firm Bernstein also said the fiscal package had done nothing to change its views about the coming year. “Our GDP forecast of 7 per cent contraction in the financial year 2020-21 remains unchanged,” it said.

Bernstein analysts tore into the government’s revival package, saying: “The need to announce measures that add up to this top-down number made the entire package aimless, with several generic announcements which should ideally, have been part of a normal economic agenda.”

Tamil Nadu attacks Centre

Another attack on the Union government came from the usually friendly Tamil Nadu, which attacked the Centre for placing conditions like stopping free electricity to farmers if they want to avail of additional borrowing facilities beyond 3 per cent. The Centre has demanded that the states should instead move to direct benefit transfer (DBT).

Tamil Nadu chief minister K. Palaniswami said: “Imposing needlessly onerous conditions on borrowings will constrain the state governments in finding funds to meet essential expenditure in the wake of a serious financial situation.” Both the DMK and the AIADMK support the provision of free electricity to farmers.

From the Left, CPI-M leader Brinda Karat also attacked the package as being completely misdirected. “On a day when 26 migrants were killed and more than 30 injured in truck accidents on their painful journey home, India’s finance minister was talking about opening up space exploration and travel to the private sector,” she said.

‘Matchless’ Modi video

The Central government is ignoring the barrage of criticism about its handling of the Covid-19 crisis and the stalling economy. On Saturday it released a video to mark one year since the Narendra Modi-led government returned to power and also its six years totally at the helm.

The nine-minute video was called “Modi government’s matchless six years”. The BJP consciously played down its one-year anniversary but that didn’t stop analysts and Opposition parties from accusing it of losing touch with reality.