The Confederation of Indian Industry (CII) has called for an immediate economic stimulus package of Rs 15 lakh crore which is equivalent to 7.5 per cent of the GDP, to get the economic activity back on track. The countrywide over-50-day lockdown due to Covid-19 had a huge impact on the economy.
The industry body said the pandemic has severely crippled the national economy. The lockdown which was necessitated to arrest the spread of contagion has come at a huge economic cost. The body said there is a need to save jobs and protect the livelihoods of crores of Indians.
"CII recommends the government to announce an immediate stimulus package of at least Rs 15 lakh crore, which translates into 7.5 per cent of GDP," said CII, President, Vikram Kirloskar.
CII has suggested a provision of Rs 2 lakh crore for additional working capital limits to be provided by banks, equivalent to the April-June wage bill of the borrowers, backed by a Government guarantee, at 4-5 per cent interest. This is to pay for the salaries of the workers and prevent job losses.
CII, Director General Chandrajit Banerjee, said, “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.”
To support the estimated 6.3 crore micro, small and medium enterprises (MSMEs) bleeding due the pandemic, CII suggested a credit protection scheme under which 60 to 70 per cent of the loan should be guaranteed by the government. That means if a borrower defaults, the government should repay the bank up to the amount it has guaranteed so the risk to the lender is limited.
In addition, CII suggested creation of a fund or special purpose vehicle with a corpus of Rs 1.4 crore to 1.6 lakh crore which will subscribe to non-convertible debentures or bonds of corporates rated A and above.The fund can be seeded by the government contributing a corpus of Rs 10,000 crore to 20,000 crore with further investments from banks and financial institutions. This will provide adequate liquidity to industry, particularly the stressed sectors like aviation, tourism and hospitality.
In order to create a significant multiplier impact on boosting demand in rest of the sectors and enhancing long-term productivity, funding public infrastructure has been found to be a potent option.
CII suggested an allocation of Rs 4 lakh crore be made on a public works programme that will create job opportunities. The work should be initiated with the involvement of state governments so that implementation bottlenecks can be overcome. Specifically, the spending can begin with the completion of projects that have already begun, such as roads which are stalled after 80 per cent of the job is complete.
CII has also suggested an allocation of Rs 2 lakh crore to be earmarked for bailing out state-run electricity distribution companies that have been accumulating losses and burdening the state exchequer.