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Coronavirus pandemic | FICCI says economy needs a stimulus package of Rs 9-10 lakh crore

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Apex industry-body, Federation of Indian Chambers of Commerce and Industry (FICCI) has said that India may need an economic stimulus of as much as Rs 9-10 lakh crore to ensure that the economy wrestles through the challenges posed by the COVID-19 crisis.

Amid stymied economic activity due to a nationwide lockdown, several key sectors of the Indian economy are experiencing distress such as travel, tourism, entertainment, manufacturing, transport infrastructure, financial services, among others.

According to a Business Continuity Plan report by FICCI, there is an immediate need for a significant stimulus of Rs 9-10 lakh crores, this constitutes around 4-5% of the current GDP.

Other countries affected by the COVID-19 crisis have taken similar steps. For instance, the US has invested as much as 11 percent of its GDP to infuse liquidity into its economy.

The report recommends utilisation of funds for the rehabilitation of informal workers, MSMEs, and large corporates.

To ease the lack of liquidity that borrowers face amid the nationwide lockdown, the Reserve Bank of India on March 27 allowed banks and financial institutions to offer a three-month moratorium on term loans and credit card bills.

The FICCI report recommends extending a similar moratorium for loans taken from mutual funds and insurance companies.

In order to ensure workers resume jobs, the report recommends special transportation to get migration workers back to factories. The lockdown has caused a shortage of labour across sectors as migrant workers left for native places. The report also recommends engaging with trade unions to ensure a smooth transition.

Interest-free and collateral-free loans should be given to MSMEs for a period of upto 12 months to enable them to cover fixed costs, salaries and other operational expenses. This loan may be given with pre-conditions that businesses will continue to run and there would be no layoffs of workers.

Supply-side intervention recommendations

Provide greater regulatory forbearance including change in NPA definition and loan restructuring among other things. NPA recognition period to be extended from 90 days to a minimum of 360 days.

All tax payments including GST payments should be deferred by six months without inviting any penalty.

To ensure MSMEs are not forced to file for bankruptcy, the report recommends suspension of Sec 7, 9 and 10 of IBC with immediate effect instead of April 30. Between April 14-30, IBC may get triggered because of a lack of liquidity within the industry.

There is also a need to ensure all pending payments to the industry are cleared immediately by the government departments and PSUs.

There is a need to accelerate infrastructure spend of Rs 1.7 lakh crore allocated in Budget 2020 to provide immediate impetus to the economy. The report recommends directing the budget towards low cost housing and road construction.