Industry bodies call on govt for stimulus of up to Rs 16 lakh crore
Industry bodies redoubled calls for a financial package of Rs 14 lakh crore to Rs 16 lakh crore to revive the economy even as they supported Prime Minister Narendra Modi’s decision to extend the 21-day lockdown that ended on Tuesday by 19 days to May 3.
The Federation of Indian Chambers of Commerce and Industry (Ficci) on Tuesday estimated the magnitude of daily losses arising from the national slowdown at Rs 40,000 crore . “It is also expected that close to 40 million jobs are at risk during the period April-September 2020. Hence, an urgent relief package is also critical,” Ficci president Sangita Reddy said.
In his speech on Tuesday morning announcing the extension, Modi also asked companies not to retrench people. “Show empathy to people working in your business,” he said.
But roiled by the lockdown, which has bought economic activity to a standstill, Indian industry is looking for an economic package from the government -- akin to the one announced by the US, around 10% of that country’s gross domestic product (GDP), in the form of assistance to individuals, companies, and states.
“The economy needs a stimulus package of at least about Rs 14 lakh crore , including around Rs 2.20 lakh crore fertiliser dues, payments from public sector companies, and tax and other refunds,” Niranjan Hiranandani, president, Associated Chambers of Commerce and Industry of India (Assocham), said. DK Aggarwal, president of the PHD Chambers of Commerce and Industry, demanded “an increased stimulus relief package of Rs 16 lakh crore”.
The other element of the package should be focused on creating demand, which is going to be a major challenge for the industry when the economy reopens, Hiranandani said. “Cut GST [Goods and Services Tax] rates by 50% for six months to boost demand. This will cost (the government) Rs 3 lakh crore.”
Demand can also be created by paying another Rs 80,000 crore through a direct cash transfer to farmers. “Pay them each about Rs 5,000 additional cash,” he said. Micro, small and medium enterprises (MSMEs) are on the verge of closure due to liquidity crunch and other issues, he added. “They need about Rs 2.80 lakh crore in terms of low cost credit and other incentives.”
Other sectors are also hurting.
Exporters, particularly small units, are on the verge of closure, said Sharad Kumar Saraf, president, the Federation of Indian Export Organisations (FIEO). They have no money to pay wages this month, he added, disappointed at the extension of the lockdown.
“The shifting of the goalpost will not help in avoiding the stark realities which we have to face whenever we open,” Saraf said, listing issues such as unavailability of labour and raw material and poor logistics.
Industry is also keen that at least some sectors are opened up for business.
“Of course, there is an impact on the economy. It will take longer to get the wheels turning. But I feel more comfortable to put this behind us rather than face a shutdown again later. I think that the farm sector should open as soon as possible,” Confederation of Indian Industry (CII) president Vikram Kirloskar said.
Ahead of Tuesday’s address by the Prime Minister, the expectation was that the lockdown would be lifted in phases -- in parts of the country where no infections were being seen -- and with some companies being allowed to operate factories with a fraction of their staff. Modi did hint at a staggered exit, but details on this are awaited.
Ficci’s Reddy said that supplies of some essentials have started getting impacted. “The Prime Minister’s directions on graded opening will help start some production activity to ensure that as soon as lockdown opens, there are no shortages faced,” she said.
CII director general Chandrajit Banerjee seconded her and said Modi’s guidance on a calibrated exit from April 20 will give crucial time for the industry to plan better. He, however, hoped that “support measures will be announced for industry, especially MSMEs, to tide over this crisis”.
The deferment of the selective opening of industry, particularly exports, is “disappointing”, FIEO’s Saraf said. “Non-adherence to the delivery schedule for exports will result in cancellation, penalties and market loss, besides the business loss to enterprises.”
Industry, however, endorsed Prime Minister Narendra Modi’s cautious approach, giving preference to saving lives. “The incubation period of the virus is 15-20 days. A 40-day lockdown is safeguarding us for two cycles of the virus and gives us a chance to consolidate the considerable gains of the first lockdown,” Reddy said.
Two persons in the government with direct knowledge of the thinking on an economic package described the situation as evolving. The government is conscious of the condition of the economy and wants to revive it expeditiously, but the first priority is saving lives, one of them said on condition of anonymity.
“The government has already given a Rs 1.7 lakh crore package on March 26. The next is expected sooner than later. But, priority is direct protection of vulnerable section of society, informal sector and MSME,” this person added.
“It is not an easy task. How do you decide a right package? The size of the package will be understood only after exact requirement is assessed. It is a work in progress,” the second official said, asking not to be identified.