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Credit backstop

Photo: ReutersPremium
Photo: Reuters

To aid an economic recovery over the rest of 2021-22, larger fiscal efforts are now needed, specifically those that can act effectively to backstop aggregate demand

The government on Sunday expanded the coverage of its Emergency Credit Line Guarantee Scheme, drawing into its fold the civil aviation sector, which is among the worst hit by the covid outbreak, and offering a full backstop for loans of up to 2 crore granted to hospitals, nursing homes, clinics and medical colleges for on-site oxygen generation units. There were other relaxations as well, such as a tenure extension for some loans given under previous rounds of this facility.

Earlier this month, the central bank had opened an on-tap credit window worth 50 crore for a healthcare ramp-up, and banks availing of repo-rate liquidity to lend for the purpose should be among those pleased by the latest relief measures. Small-business borrowers and beneficiaries in other sectors needed a breather, of course, given the shock of a second wave of covid. Credit channels, however, are one mechanism among several by which the Centre can help our economy recover from this quarter’s unexpected blow. To aid an economic recovery over the rest of 2021-22, larger fiscal efforts are now needed, specifically those that can act effectively to backstop aggregate demand.

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