COVID-19 economic impact: CII bats for an immediate stimulus package of Rs 15 lakh crore

“With economic activities being restricted for over 50 days now, the negative impact on the economy is expected to be even more significant than what we had earlier anticipated. This needs to be offset by a large fiscal stimulus so that jobs and livelihoods are protected. CII recommends the government to announce an immediate stimulus package of at Rs 15 lakh crore, which translates into 7.5% of GDP," said  Vikram Kirloskar, President, Confederation of Indian Industry. 

The broad elements of the stimulus include cash transfers amounting to Rs 2 lakh crore to JAM account holders, in addition to the Rs 1.7 lakh stimulus already announced. “A key fall out of this economic slowdown would be the human cost in terms of loss of jobs and livelihoods, which need urgent government intervention”, said Chandrajit Banerjee, Director General, CII.

It should be ensured that the migrant labourers are kept within the purview of the proposed cash transfers, Banerjee added.

Further, in order to provide enterprises the immediate support to pay salaries to its workers and avoid any job losses, CII has suggested a provision of Rs 2 lakh crore for additional working capital limits to be provided by banks, equivalent to April-June wage bill of the borrowers, backed by a Government guarantee, at 4-5% interest.

To support the estimated 63 million MSMEs which have been battered by the pandemic, CII has suggested a  credit protection scheme for  MSMEs whereby  6 0-70% of the loan should be guaranteed by the government, i.e. if the borrower defaults, government should repay the bank upto the amount it has guaranteed, so the risk to the lender is limited. This will encourage the banks to lend to the ailing sector so that their working capital needs are met.

In addition, CII has suggested the creation of a fund or SPV with a corpus of Rs 1.4-1.6 lakh cr ore which will subscribe to NCDs/Bonds of corporates rated A and above.

The fund can be seeded by the Government contributing a corpus of Rs 10,0 00-20,000 crore, with further investments from banks and financial institutions. This will provide adequate liquidity to industry, particularly the stressed sectors such as aviation, tourism and hospitality.