To mitigate the impact of coronavirus outbreak on the economy, India Inc has sought a host of measures, including a year-long moratorium by banks on debt repayment, tax cuts and fiscal stimulus amounting to Rs 2 lakh crore to needy citizens through Aadhaar-based direct benefit transfer. India has already been facing growth deceleration, with GDP growth falling to 4.7 per cent in the third quarter of FY2020. The impact of COVID-19 is likely to drag it down further in the fourth quarter.
The GDP growth could slide to below 5 per cent in FY2021 if policy action is not taken urgently, the Confederation of Indian Industry said. "Fiscal and monetary stimulus measures need to be announced urgently," CII Director General Chandrajit Banerjee said.
CII has written to Prime Minister Narendra Modi seeking a fiscal stimulus of 1 per cent of the GDP amounting to Rs 2 lakh crore to needy citizens through Aadhaar-based direct benefit transfer.
Giving a comprehensive note to the Covid-19 Economic Response Task Force headed by Finance Minister Nirmala Sitharaman, Assocham has sought a blanket year-long moratorium by banks on debt repayment both for corporates and individuals as also urgent infusion of liquidity by the Life Insurance Corporation of India into the NBFCs in a quasi-equity format.
"It is difficult to prepare for a Black Swan event like the outbreak of the COVID-19 pandemic. India, like most other countries, has been deeply affected. Unfortunately for India, this has come at a time when the country's credit environment was already fragile and the economy was slowing down, '' Assocham said in a letter to the Finance Minister.
To improve market sentiments, that is currently witnessing extreme volatility, the government may consider removing Long Term Capital Gains tax of 10 per cent and fixing the total Dividend Distribution Tax at 25 per cent, CII said.
It suggested that GST payments should be on collection of Bills than on raising of invoices. This will help avoid liquidity getting locked in case there is a delay in payments.
"Medium to long-term financing is key to stability of the crucial NBFCs which are one of the main sources of funding for the MSMEs, hit hardest by the coronavirus crisis. The LIC investment into the NBFCs too would bear dividends for the state-owned insurance giant once fortunes turn for the overall economic cycle," Assocham President Niranjan Hiranandani said.
The chamber's note to the Task Force stated that for all present corporate loans which are impaired, government and regulator should relax norms and allow a two-year window for the borrower and the lender to re-work the terms of loan based on the cash flow of the account.
During that period, the loan account should be classified as 'standard' so that no provisioning is needed for the same.
Among other measures, CII sought Repo rate reduction of 50 basis points and suggested that the RBI may consider relaxing the NPA recognition norms from 90 days to 180 days till September 30, 2020 to provide relief to the industry.
It said the Government could create a corpus for supporting MSMEs to tide over the crisis for wages payable during the temporary shut-down, cash flow disruptions, working capital requirements.