New Delhi: The lack of fiscal space will pose a big hurdle for the central government to announce grants for industries to pay wages of employees unable to work due to coronavirus, sources have recently said. They said that industry representatives have conducted meetings with top officials in the finance ministry urging the government to announce an economic package.
“The government lacks the fiscal space. It will not be feasible to give grants to the industry to take care of its wage bills,” said a source Thursday.
“The fiscal situation is not good, with revenues drying up. The state governments have also run up high fiscal deficits. India cannot afford to have a downgrade from rating agencies. Hence grants to support the wage bill look unlikely,” another source in the know of things stated.
The Centre has set up an empowered group of officials, led by Economic Affairs Secretary Atanu Chakraborty, to finalise recommendations on economic and welfare measures. The committee is continuously taking inputs from the industry, said sources.
The fiscal deficit of the Centre for 2019-20 (FY20) has already surpassed the Revised Estimates (RE) by 35 per cent till February 2019. The RE was higher at 3.8 per cent of gross domestic product (GDP), against the budget estimate of 3.3 per cent. For the current fiscal year, the government has pegged the deficit at 3.5 per cent of the GDP.
It should be stated here that some countries including the United Kingdom (UK) have announced financing the wage bill of industries to avert job losses. For instance, UK has announced a bailout package for businesses worth €350 billion, under which the country would be financing 80 per cent of salary of workers earning wages of up to €2,500 a month.
Indian industry bodies have sought help from the Centre through banks to support the workforce. For instance, the Confederation of Indian Industry (CII) has asked banks to allow providing additional working capital limits, equivalent to April-June wage bill of borrowers, backed by a government guarantee, with a refinance guarantee from the Reserve Bank of India (RBI).
Agencies