NEW DELHI: India's fiscal response to COVID-19 is inadequate and the country needs a stimulus package of $200-300 billion (about ₹15-22 lakh crore) over the next 12-18 months to weather the impact of the pandemic, say industry bodies.
In a letter written to Finance Minister Nirmala Sitharaman, an apex industry body, Assocham, recommended a 16-point agenda to thwart one of the deepest global recession expected in the world’s history.
'The economy would need a transfusion of over $200 billion with an ability to go up to $300 billion. 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 the loss of income. Such an infusion would help businesses and workers tide over the challenging situation,' said secretary-general Deepak Sood.
Other key recommendations 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, further reduction of interest rate/repo-rate by another 100 bps by the Reserve Bank of India (RBI) and a GST cut across the board by 50 per cent for three months and 25 per cent for the fiscal.
The Confederation of Indian Industry (CII) has called for a financial support package equivalent to two per cent of GDP, or about Rs 4 lakh crore for the industry in addition to the Rs 1.7 lakh crore the government has earmarked to ease economic distress.
'However, the government should not spend all its firepower at once as we are not going to see the end of this crisis anytime soon,' CII director-general Chandrajit Banerjee said.
CII also estimates that the economy would need a credit expansion of 14-15 per cent and that the RBI should extend support in the form of working capital enhancement, support for payment of wages to all industry and special reconstruction terms loans for MSMEs and stressed sectors.
Calling for a phased opening up of the economy, FICCI's Secretary-General Dilip Chenoy said that the hotel, aviation and tourism sectors alone are estimated to see a combined loss of $1.13 billion. While the retail sector has faced losses of up to $30 billion over the past fortnight with non-food retailers reporting 80-100 per cent reduction in the sale, the real estate sector is expected to register an annual decline of 25 to 35 per cent.
The industry body has recommended bringing down the cost of funds further through reduction in policy rates by ~ 100 basis points, interest and collateral-free loans be given to MSMEs (turnover of less than Rs 500 crores) for a period of up to 12 months, special liquidity line to NBFCs from banks and suspension of Sec 7, 9 and 10 of IBC with immediate effect instead of April 30.
'Between April 14 and April 30, there could be a trigger for insolvency because of lack of liquidity with industry,' the industry body said.
Indian Chamber of Commerce (ICC) suggested increasing the relief package immediately to at least Rs. 2.5 lakh crore to ride over the COVID-19 crisis.
ICC also recommend removal of fees for any upcoming licenses, renewal of permits, excise exemption (for liquor mainly) for the hospitality and travel industry, setting up of a task force that implements the APMC Act under government supervision and regulated trade takes place so that essential commodities are supplied at the right time at right price and hoarding and food inflation can be avoided, a relief package for the $108 billion textile industry that has accumulated huge losses after the lockdown prompted the cancellation of orders, especially that were to fetch payments in dollars.