Confederation of Indian Industry (CII) on Friday recommended the government to dole out a stimulus package worth Rs 15 lakh crore amid ongoing coronavirus lockdown. The relief package is needed since the industry is expected to have lost two months of production by the time the third phase of lockdown ends, CII said in a statement. The stimulus is required to support the poor and the industry, especially the MSMEs, it added. "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, CII.
CII also 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. "To support the estimated 63 million MSMEs which have been battered by the pandemic, CII has suggested a credit protection scheme for MSMEs whereby 60-70% 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," CII added.
The industry body also called for setting up a fund or SPV with a corpus of Rs 1.4-1.6 lakh crore which will subscribe to NCDs or bonds of corporates rated A and above to provide liquidity to the industry. The government could provide a seed capital worth Rs 10,000-20,000 crore, it said.
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.
In April too, the CII had suggested that the central government should announce an economic package and give adequate notice before lifting the lockdown. It also lent support to the growing calls of a calibrated and safe exit from the lockdown.
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