We’ve gone from asking for a 10% of GDP covid-19 relief government plan to a grumble about the announced ₹20 trillion package (which is 10% of GDP) being just 1% of GDP, because the fiscal (what the government spends out of its annual budget) spend is only ₹2 trillion. We seem to care about where the money is coming from and not where it is going and what it is going to do.
A basic question first: why does the government need to spend its way out of this crisis? The covid-induced lockdown has caused both a demand and a supply side shock to the system. This situation needs an external entity—the government—to give lifelines of both income, cheap foodstuffs and credit (through its bank—the central bank) to people who most need them. How much should it spend and for what? Countries like the US, some parts of the EU and Japan announced spends of around 10% of GDP and are using the money for direct cash transfers to a workforce that has been furloughed or is out of work, to open liquidity windows, to buy bonds from corporates directly by the central banks and for existing unemployment benefits that have soared. The developed countries that have the good historical fortune of owning global reserve currencies—that the rest of the world buys to store value—are simply printing currency (it’s also called monetizing their debt) to fund their deficits.