New Delhi: India Inc has requested the Centre to immediately institute a stimulus package ranging from Rs 9 to Rs 11 lakh crore to mitigate the impact of COVID-19 outbreak.
Accordingly, several leading industry bodies including CII, Ficci, Assocham and PHD Chambers have individually recommended a slew of steps including the need for the Centre to immediately come out with a stimulus package.
At present, India is under a lockdown which will last till midnight April 14. This has dealt a heavy blow to commerce and led to temporary closure of shopping malls, dine-in restaurants, grounding of aircraft, shutting down of factories and deserted market places.
Consequently, ratings agencies have cut the country’s GDP forecast. This has led several leading industry bodies to request the Centre for a relief package.
In its recommendations, industry body CII has urged the Centre to provide a fiscal support package, for FY21, limited to 2 per cent of the GDP and to support enterprises through banks.
The industry body in its recommendations — ‘Towards an Organised, Safe & Sustainable Re-start of the Economy’ — said: “Since we are not going to see the end of the crisis soon, the government should not spend all its firepower at once. Safeguarding macro fundamentals is important to ensure that the country does not suffer significant rating downgrades, and potential flight of capital.
“In view of this, we recommend a fiscal support package, for FY21, limited to 2 per cent of the GDP, in addition to the INR 1.7 lakh crore provided under the Pradhan Mantri Garib Kalyan Yojana.”
Besides, the industry body has urged the Central government to support enterprises through banks.
“Our estimates are that the economy would need a credit expansion of 14-15 per cent,” the recommendation paper said.
CII requested the RBI to extend the wage and interest support. “Banks should provide additional working capital limits, equivalent to the April-June wage bill of the borrowers, backed by a government guarantee, at 4-5 per cent, with a refinance guarantee from RBI,” the paper read.
Similarly, Ficci recommended that the economy requires an immediate stimulus package of Rs 9-Rs 10 lakh crore, which would account for 4-5 per cent of the country’s GDP, to recover from the impact of the coronavirus crisis and the ongoing nationwide lockdown.
The report noted that other countries have also taken similar steps. The debt-to-GDP ratio of India is manageable, it added.
“This money will be injected for relief and rehabilitation across all levels of the economy including people at the bottom of the pyramid, informal workers, micro, small and medium enterprises and large corporates,” it said.
The industry body has also suggested setting up of a ‘Bharat Self-Sufficiency Fund’ with an outlay of Rs 2 lakh crore. It said that the fund could be used to promote scientific research and innovation for building a stronger and resilient nation and creating self-sufficient industry clusters with fully developed value chains within the country for products where India has high import dependence.
It said that given the complete breakdown of businesses, there is a need to assess the situation and if required, the timeline for loan moratorium should be extended.
“Provide greater regulatory forbearance, including change in NPA definition and loan restructuring etc. NPA recognition period to be extended from 90 days to a minimum of 360 days,” it said.
Ficci also recommended that interest free and collateral free loans be given to MSME companies, with a turnover of less than Rs 500 crore for a period of upto 12 months depending on the sector to enable them to cover fixed costs, salaries and other operational expenses.
This loan can be given with pre-conditions that businesses will continue to run and there would be no layoffs of workers and after one year it will be converted into a grant if all conditions are met.
It also said that a moratorium should be extended for loans taken from mutual funds and insurance companies.
On its part, Assocham has urged the Centre for a stimulus package of at least $200-$300 billion over the next 12-18 months to support the Indian economy.
In a 16-point agenda, the industry body recommended that the Centre institute a stimulus package of at least $200-$300 billion to “thwart one of the deepest global recession expected in the world’s history”.
According to Assocham Secretary-General, Deepak Sood, the chamber believes that in keeping up with most economies of the world to institute stimulus measures with 10 per cent of the Gross Domestic Product (GDP), the Indian economy would need a transfusion of over $200 billion with an ability to go up to $300 billion, over the next 12-18 months.
He stated that out of the corpus, $50-100 billion cash needs to be infused in the system over the next three months, to arrest the loss of jobs and compensate for loss of income.
“It will be critical to ensure we proceed with three objectives i.e. immediate assistance to employees and labour through direct transfers and through employers, ensuring that companies have enough cash flow to survive the downturn, and finally stimulating demand and investment to revive the economy through fiscal and tax measures,” the industry body said in a statement.
Besides, the industry body requested the government to modify the FRBM Act to consider the debt to GDP ratio as a metric and not fiscal deficit.
“The government needs to set an example for other businesses with no bills being unpaid for more than 15 days,” Sood said, as per a statement.
“This will enormously help the credit cycle and will also bring down tender prices for everything.”
With the deflation that is expected in overall demand, the government should implement the National Infrastructure Plan with no loss of time, once the lockdown is completed.
Some of the other key recommendations to the Finance Ministry include one-time loan restructuring to all corporates assuming a principal repayment start date moving upwards from March 2021, NCLT provisions to be held in abeyance for 6 months and a further reduction of repo-rate by another 100 bps by the Reserve Bank of India.
Another leading industry body PHD Chamber has asked the Centre to provide Rs 11 lakh crore stimulus package to mitigate the impact of the Covid-19 pandemic.
PHD Chamber of Commerce and Industry President D.K. Aggarwal has recommended the Centre to institute a fiscal stimulus of at least 5 per cent of the country’s GDP which comes around Rs 11 lakh crore.
“The government has already provided a stimulus of Rs 2 lakh crore, therefore, our expectation is for the remaining Rs 9 lakh crore in terms of various relief measures and benefits to India’s trade and industry,” Aggarwal said, as per a statement.
“A significant stimulus to the tune of 5 per cent of GDP would help the economy to grow at around 5 per cent in the current financial year 2020-21.”
Furthermore, the industry body recommended to the government to increase consumption expenditure in the economy and compromise with the fiscal deficit “even if it slips by 2 to 3 percentage points in the current financial year 2020-21”.
“Such reform measures would go a long way to help trade and industry to operate in this extremely difficult time.”
In its short-term suggestions, PHD Chamber has suggested an immediate reduction in the lending rate by all the banks to percolate the full effect of recent 75 basis points cut in repo rate by the RBI.
“Also, we suggest to defer the EMIs of the term-loans for 6 months, special interest subvention @ 3 per cent p.a. in loans to MSMEs and other badly affected industries, abolish all fixed charges of all the utilities and defer utilities bills by 3 months,” he said.
In the long-term suggestions, the industry body requested for a reduction of income tax of the proprietorship and LLPs firms to the level of 25 per cent for old and 15 per cent for new companies; reducing the customs duties on basic raw material by at least 5 percentage points; and reducing the cost of capital with a further reduction of 100 basis points cut in the repo rate.
“We suggest rationalisation of GST rate structure by merging the 18 per cent tax slab with 12 per cent tax slab, and further recapitalization of the Public Sector Banks,” said Aggarwal.
“Increase in government consumption expenditure and capacity building by the business firms would be crucial at this juncture to rejuvenate the economy to its potential growth trajectory of 7-8 per cent in the next few years.”
(IANS)