The Confederation of Indian Industry (CII) on Wednesday Called for a fiscal support package for FY21 limited to 2 per cent of the GDP and to support enterprises through banks.
In a report titled as, ‘Towards an Organised, Safe & Sustainable Re-start of the Economy’, the industry body said that the government need to support enterprises via banks, and additional reconstruction trim loans to MSMEs and stressed sectors.
“Since we are not going to see the end of the crisis soon, the government should not spend all its firepower at once. Safeguarding macro fundamentals are important to ensure that the country does not suffer significant rating downgrades and potential flight of capital.”
“In view of this, we recommend a fiscal support package, for FY21, limited to 2 per cent of the GDP, in addition to the INR 1.7 lakh crore provided under the Pradhan Mantri Garib Kalyan Yojana.”
Besides, CII recommended the government to support enterprises through banks and additional reconstruction term loans to MSMEs and stressed sectors with government guarantee on default up to 20 per cent.
“The government should extend additional support to the people at the bottom of the pyramid through cash transfers. Support to industry could come through the banking system. Our estimates are that the economy would need a credit expansion of 14-15 per cent,” Chandrajit Banerjee, Director-General, CII said in the recommendation paper.
The CII requested the Reserve Bank of India to extend the wage and interest support. “Banks should provide additional working capital limits, equivalent to the April-June wage bill of the borrowers, backed by a government guarantee, at 4-5 per cent, with a refinance guarantee from RBI,” the paper read.
“A similar carve-out could be provided for the April-June interest obligations of the stressed sectors.”
The industry body also called for working capital support for the industry. “Allow banks to provide enhanced credit limits for working capital across the board to all industries,” the paper said.
“Banks should provide additional reconstruction term loans to MSMEs, which are otherwise sound, but impacted by the shutdown, with Government of India offering a guarantee up to 20 per cent of the default,” it added.
As per the recommendations, the government should create a dashboard to monitor curves of various key cities and states.
“The re-start calendar across cities and states should be based on the dashboard. The progressive ramp-up in terms of the proportion of manpower allowed to get back to work, should be based on the movement of the respective curves on the dashboard,” the paper pointed out.
In terms of sectors, CII said that those industries where work from home is difficult and which provide mass employment could be re-started first.
In phase 1, CII recommended manufacturing, e-commerce and construction, alongside logistics and transport should be re-started first. After 2-3 weeks of phase 1, based on the progression of the city or state graphs, all other sectors could start.
“The ramp-up could be 50 per cent employees to start with, for about 3 weeks. This could be increased gradually, based on how the curves are progressing in various cities and states,” the paper said adding that the government should ensure health adequate availability of masks, testing and protective gear for the workers.