The Confederation of Indian Industry (CII) has pressed the Prime Minister Narendra Modi for a fiscal stimulus of Rs 2 lakh crore to counter the impact of coronavirus (COVID-19) on the industry and economy. The industry body also asked a slew of tax cuts and reduction in the interest rates for the same. The CII director-general, Chandrajit Banerjee said that business is going to see a huge amount of disruption. He added sectors like real estate, tourism, aviation, and aggregators are witnessing maximum stress due to coronavirus-induced slowdown and supply chain issues.
CII wrote a letter addressing the Prime Minister Narendra Modi stating that the government should consider a fiscal stimulus of Rs 2 lakh crore (1% of the GDP). They also asked that this amount should be given to the needy citizens through Aadhaar-based Direct Benefit Transfer. In the letter, CII asked that Rs 5,000 should be given to each individual who are the rural and urban poor while Rs 10,000 for the most vulnerable section of the society – the elderly.
“Our plea for more fiscal space is directed to lessen that economic fear of individuals, give money into the hands of people by direct benefit transfer in a mechanism which will help people get money, to those who are less privileged in the society,” Banerjee told PTI.
The industry body also suggested that the Goods and Services Tax (GST) payments should be on collection of bills rather than on raising of invoices. Doing this would help avoid the liquidity getting locked in case there are delays in the payments. It also considered easing the cost of capital, which is currently under wide volatility. Also, the government may also consider removing Long Term Capital Gains tax of 10% and fixing the total Dividend Distribution Tax at 25%. The industry body also recommended a reduction of 50 basis points in Cash Reserve Ration (CRR) along with in the repo rate to ensure that banks have the liquidity to lend to the industry.
CII has also decided to take certain proactive steps that will need to be scaled up and revisited as COVID-19 progresses in the country. The industry body also appealed to the senior executives for exploring ways to take pay cuts to meet the cost challenges.
“For one, we are asking all our members to explore the possibilities of all blue-collar employees and contract labourers we have engaged in our factories and service lines. We also firmly believe that we as senior top brass in our firms should explore ways to take pay cuts to meet cost challenges,” CII wrote in the letter.
It also said that the RBI should consider relaxing the NPA recognition norms from 90 days to 180 days till September 30, 2020. Doing this would provide relief to the industry faced with payment issues as well as pressure on banks to classify loans as NPAs.
“These immediate measures will help industry and economy manages the economic impact and also help the banking sector tide over the stress of NPAs due to delayed debt servicing arising out of disruptions in business operations especially of SMEs,” said CII.