[ad_1]
The Confederation of Indian Industry (IIC) said on Friday that the impact of a prolonged blockade on the economy is severe and demanded a stimulus package of Rs 15 lakh crore, substantially revising its previous estimates of Rs 4.5 lakh crore.
IIC President Vikram Kirloskar said the negative impact on the economy is expected to be even more significant than the industry had previously anticipated, and that it should be offset by strong fiscal stimulus.
“The IIC recommends that the government announce an immediate stimulus package of Rs 15 lakh crore, which translates to 7.5% of GDP (gross domestic product),” he said. By the end of the third phase of the blockade, the economy would have lost almost two months of production, he added. India has been under a blocking situation to contain the spread of Covid-19 since March 25. Closing is scheduled to end on May 17.
Other industry associations have also called for a large stimulus package to get the economy back on track. While the Federation of Indian Chambers of Commerce and Industry (Ficci) has asked for a ~ 10 lakh crore package, the PHD Chambers of Commerce and Industry have demanded Rs 16 lakh crore.
President of the Indian Chamber of Commerce and Industry (Assocham), Niranjan Hiranandani, emphasized the urgent need for a stimulus package. “NITI Aayog has proposed a stimulus package of Rs 10 lakh crore and we suggest a package for Rs 14 lakh crore,” he said.
While industry bodies supported the government’s initial response under Prime Minister Garib Kalyan Yojana (PMGKY), they are unanimous on a large stimulus package to save lives and livelihoods. On March 26, the government announced a package of Rs 1.7 lakh crore under PMGKY, about 0.8% of GDP. The social assistance package aimed to provide immediate help to the poor by providing a three-month ration and cooking gas for free direct cash transfer to disadvantaged women, the elderly and the disabled. Since then, there have been reports of a tax package to be announced soon for the industry, but none have been.
Immediate substantive government stimulus is required for both the poor and the industry, especially micro, small, and medium-sized enterprises (MSMEs), IIC said.
“Clearly, time is running out for a fiscal stimulus package to rescue the economy. Delayed tax relief for companies reeling under the blockade will make it harder for them to recover, “said IIC CEO Chandrajit Banerjee.
He proposed direct cash transfers of Rs 2 lakh crore to the poor who have bank accounts linked through the JAM trinity (Jan-Dhan, Aadhaar and mobile) in addition to the Rs 1.7 lakh PMGKY package.
It must be ensured that migrant workers remain within the scope of the proposed cash transfers, Banerjee said.
IIC also sought the immediate support of Rs 2 lakh crore in the form of additional working capital for companies to pay wages and avoid job losses. The additional working capital provided by the banks for the April-June wage bill must be backed by a government guarantee with an interest of 4-5%, he added.
To support some 63 million MSMEs, the IIC suggested a credit protection scheme where the government should guarantee between 60 and 70% of the loan. In other words, if the borrower does not pay, the government should repay the bank up to the amount it has guaranteed, so the risk to the lender is limited.
The industry body proposed the creation of a fund with a corpus of Rs 1.4-1.6 lakh crore to be subscribed to obligations or non-convertible bonds of companies rated A and above.
“The government can seed the fund by providing a corpus of Rs 10,000-20,000 crore, with more investment from banks and financial institutions. This will provide adequate liquidity to the industry, particularly to stressed sectors such as aviation, tourism and hospitality, “he said.
He emphasized improving public spending infrastructure to boost demand in the economy with an allocation of Rs 4 lakh crore.
“The work must begin with the participation of state governments, so that implementation bottlenecks can be overcome. Specifically, spending can start with the completion of projects that have already started, such as roads that stagnate after 80% of the work is completed, ”he said.
IIC also suggested an allocation of Rs 2 lakh crore to rescue state power distribution companies that have been accumulating losses and burdening the state treasury.
He demanded an allocation of Rs 2 lakh crore for the bank recapitalization that is required to keep the financial sector robust so that they can meet the credit needs of the industry. “This will help public sector banks manage any increases in their NPAs (non-performing assets).”
In addition, the IIC suggested supporting Rs 4 lakh crore from the signing of the government document by the Reserve Bank of India (RBI), given the fact that inflationary pressures remain muted in light of depressed demand conditions. .
“The government can borrow a smaller amount of Rs 2 lakh crore from the secondary market, so that bond yields remain moderate. In addition, a substantial reduction in spending of around Rs 4 lakh crore is possible by reducing some of the discretionary spending, such as centrally sponsored plans. These are some of the channels that would finance the package, ”he said.
.
[ad_2]
