Industry wants phased exit from lockdown, up to Rs 23 trillion package

Industry has demanded a calibrated lifting of the lockdown as soon as it is feasible and a Rs 23 trillion economic rescue package for itself and weaker sections of the society.

While Assocham demanded a Rs 15-23 trillion package ($200 billion to $ 300 billion), Ficci called for a Rs 9-10 trillion stimulus, PHDCCI asked for Rs 9 trillion and CII backed a rescue package of 2 per cent of GDP.

Two per cent of the GDP comes to about Rs 4.5 trillion if the size of the economy is assumed to be Rs 224.89 trillion for FY21 on the basis of which the latest budget was prepared. However, the size is likely to be much less than the assumption.

According to SBI group's chief economic advisor Soumya Kanti Ghosh, Rs 6.6 trillion would be needed to help the industry grow and pay wages to the labour and budgetary support to states. He also called for staggered lifting of lock down.

According to its note sent by CII to various ministries including finance and commerce, the GDP growth rate would not be more than two per cent in the current financial year and could be even less.

"It is our considered judgement that the impact is severely adverse... We are fully aligned with the government's view that the shutdown would need to be lifted as early as feasible, though in a calibrated manner," the chamber said.

CII said the government should create a dashboard to monitor daily epidemic 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 proportion of manpower allowed to get back to work should be based on the movement of the respective curves on the dashboard, it said.

The sectors where work from home is difficult and which provide mass employment could be re-started first.

In the phase one, manufacturing, e-commerce and construction. alongside, logistics and transport should be allowed to operate, in the phase two which should begin two-three weeks after the start of the phase 1, all other sectors could start, based on assessment on the dashboard, the chamber said.

The ramp up could be 50% employees to start with, for about three weeks. This could be increased gradually, based on how the curves are progressing in various cities and states.

Justifying its demand for a package to the tune of of 2 per cent of GDP, the chamber said since the crisis is not going to end soon, the government should not spend all its firepower at once.

Fearing that the pain in the real sector could very rapidly spread to the banking and financial sector, it wanted the Government to set apart a fund of Rs 30,000 crore that could be used by banks that meet certain criteria and under specified conditions.

Banks can use this fund by way of issuing tier I bonds, which will be convertible into equity at the option of the fund.

The chamber demanded additional support to the lowest strata of the society, besides Rs 1.7 trillion already announced by the government.

It called for providing Rs two trillion to JAM account holders.

It said rather than the government giving direct subsidies to industry, as has been done in a few other countries, it is preferable to leverage (5-6 times) through the banking system and support the industry through banks.

"Our estimates are that the economy would need a credit expansion of 14-15 per cent," it said.

As such, it demanded that banks should provide additional working capital limits, equivalent to April - June wage bill of the borrowers, backed by a government guarantee, at 4-5 per cent interest rate, with a refinance guarantee from RBI.

A similar carve out could be provided for the April – June interest obligations of the stressed sectors, the chamber said.

It also wanted that banks be allowed to provide enhanced credit limits for working capital across the board to all industries.

The chamber also demanded additional reconstruction loans to MSMEs, with the government guarantee up to 20 per cent of default, seamless transportation of goods and services across the country, allowing dhabas, repair shops to operate on highways.

It further demanded that the logistics service providers should extend insurance cover to the workers and their families to the tune of Rs 10-15 lakh for a period of 3 months. The additional cost could be adjusted in the freight rates.

The chamber also wanted that there should be a tri-partite dialogue between government, worker associations,unions and industry to allay the health and safety related concerns of the workers.

Also, a COVID insurance scheme could be announced for migrant workers, for three months. part of the cost could be borne by the government and part by industry, CII said.

And then, migrant workers should be issued e-passes by the local authorities to allow them to travel to their work places.

FICCI said Rs 9-10 trillion be injected for relief and rehabilitation across all levels of the economy including people at the bottom of the pyramid, informal workers, MSMEs and large corporate.

The chamber also wanted setting up of a post-COVID revival fund -- Bharat Self Sufficiency Fund-- with a corpus of Rs two trillion.

In a letter to finance minister Nirmala Sitharaman, Assocham said the Indian economy would need a transfusion of over $200 billion with an ability to go up to $300 billion, over the next 12-18 months. It said out of the corpus, $50-100 billion (Rs 3.8 trillion- 7.6 trillion) cash needs to be infused in the system over the next three months to arrest the loss of jobs and compensate for loss of income.

Such an infusion would help businesses and workers tide over the challenging situation, it said.

PHDCCI president D K Aggarwal said," the government has already provided a stimulus of Rs two trillion, therefore, our expectation is for the remaining Rs nine trillion in terms of various relief measures and benefits to India’s trade and industry."