The prime minister’s decision to slash the prices of petroleum products and power tariff will be a popular move but it may not sit down well with the IMF. The financial institution is set to review the PM’s relief measures in a face of a challenging global situation.
The prime minister said the government was able to reduce prices as it has enough money now. During the current fiscal year, the government will provide a direct subsidy of Rs200 billion on electricity and Rs160 billion on POL prices. It needs to be seen how the IMF will respond to the new relief measures which seem at odds with the recent bailout programme.
The government is certainly willing to withstand the pressure amid the current political scenario. The prime minister is facing the threat of a no-confidence motion and has reached out to disgruntled allies and party members to offset the opposition’s overtures. Opposition parties are also marching on the pretext of worsening economic scenario. Under the current situation, it was a rather audacious move by the premier to announce the measures which can placate the masses, at least for now. These are unprecedented times and the country has never faced a similar situation, and thus required drastic measures.
The prime minister also announced a tax amnesty scheme and invited businessmen to invest in industry. Although it can be argued whether such schemes provide an opportunity to whiten black money and support corruption, the prime minister has certainly reached out to different segments of society. It has provided tax exemptions for IT sector, internships for graduate youth, and increased cash stipends for low-income groups.
The government has faced a tough economic situation exacerbated by the pandemic. It had to change gears from macro-economic stability to growth and replace the economic team. It is either a tough political situation or the impression of diminishing popularity, the prime minister has taken a huge gamble to win over support from the inflation-stricken masses which can catapult him back to power.
