New Delhi : The Confederation of Indian Industry (CII) has called for a fiscal support package during the current financial year 2020-21 limited to two per cent of the gross domestic product (GDP) in addition to the Rs 1.7 lakh crore provided under the Pradhan Mantri Garib Kalyan Yojana.
The industry body undertook a massive contact programme with over 8,000 member companies directly and indirectly to assess the issues being faced by these organisations and the overall economic impact of coronavirus pandemic and the consequent shutdown.
“It is our considered judgement that the impact is severely adverse and the best estimates of GDP growth for the current fiscal will be no more than about two per cent with a downward bias,” it said in key recommendations.
Safeguarding macro fundamentals are important to ensure that the country does not suffer significant rating downgrades and potential flight of capital, it added.
CII said the economic crisis will affect the lowest strata and informal sector in the economic pyramid disproportionately. It called for providing cash transfer amounting to Rs 2 lakh crore to Jan Dhan-Aadhaar-Mobile (JAM) account holders.
For the re-start to be organised, safe and sustainable, various issues related to health and safety, logistics, migrant workers and coordination between various agencies of the government also need to be addressed.
CII said it is fully aligned with the government’ s view that the shutdown will need to be lifted as early as feasible, though in a calibrated manner.
“India should brace itself for what may be a long haul to overcome the public health crisis and the economic crisis precipitated by the corona pandemic,” it said. The industry body called for allowing banks to provide enhanced credit limits for working capital across the board to all industries.
Banks should provide additional reconstruction term loans to micro, small and medium enterprises (MSMEs) which are otherwise sound but impacted by the shutdown with the government offering a guarantee up to 20 per cent of the default.
Besides, said CII, banks should provide additional reconstruction term loans to stressed sectors like aviation and tourism with a guarantee of up to 20 per cent of the default from government.
It also called for setting apart a fund of Rs 30,000 crore which could be used by banks to access it by way of issuing tier one bonds which will be convertible into equity at the option of the fund. This will protect the system by pre-emptively rescuing deserving banks from collapse.
