India likely to go in for a USD 18bn recovery package

Not just putting direct cash in the 'Jan Dhan' accounts of millions, the government is likely to reduce GST on essential items including hand sanitisers and also allow companies the benefit of deferred corporate taxes in lieu of employment retainment.

The fiscal package may also cover the market that has seen a bloodbath for past couple of weeks. The centre and capital markets regulator Sebi are considering temporary removal of tax on share buybacks and on long-term capital gains (LTCG). This would be big booster for investors at this time of continuous market slide as buybacks would allow investors to exit at better prices while removal of tax on LTCG will help in bringing more investors to the market.

Furthermore, the Centre's financial arsenal is likely to be supplemented by easy cash availability for the middle class segment to give an initial boost to consumption. This segment may also be given relief on EMI repayments as its payment may be deferred by a few months.

"Saving rates might come down drastically, so will lending rates," an industry expert, who closely works with both the government and private sector said.

"All options are on the table, not just direct cash transfer."

However, direct cash transfer is being considered as the most favoured remedy to deal with the situation followed by a GST and lending rate cuts. Currently, fears of massive unemployment have become clear and present due to the personal movement restrictions placed to decelerate the spread of Covid-19.

This has led to closure of everything from dine-in restaurants, grounding of aircraft, closure of factories and deserted market places till April 14.

Meanwhile, US and European policy makers have turned towards the concept of 'Helicopter Drop' fiscal support scheme to avert an impending economic disaster due to the outbreak. Earlier, experts had said that in India's case, the time is ripe to implement such a scheme citing that funding requirements can be taken care via the savings accrued due to the massive drop in crude oil prices.

On the revenue side,  another excise duty hike on petrol and diesel by Rs 8 per litre can arrange funds worth over Rs 120,000 crore or $17 billion. More funds can be made available from big savings that the government is expected to make in its oil import bill. Will oil expected to touch $20 a barrel, India could look at reducing its import bill by $25-30 billion. Last week, it had raised excise duty on petrol and diesel by Rs 3 per litre that would provide it additional revenue to the turn of Rs 45,000 crore in one full year. Now armed with legislation, it has the power to raise excise duty on petrol and diesel by upto Rs 8 per litre.