Amid talks over over extending the 21-day nationwide lockdown, the Confederation of Indian Industry (CII) has suggested to the government to follow a phased reopening plan with sectors such as manufacturing and construction, that provide mass employment, re-started first.
The CII also sought a fiscal support package for FY21 limited to 2% of the GDP to support the lowest strata and the informal sector and ₹2 lakh crore be transferred to JAM account holders.
The CII, however, also cautioned that it was important to safeguard the macro fundamentals to ensure India did not suffer significant rating downgrades and a potential flight of capital. “Since we are not going to see the end of the crisis soon, the government should not spend all its firepower at once,” the CII said.
For lifting the lockdown, the industry body has pitched for a “re-start calendar” across cities and States, based on a dashboard that can monitor curves of various key cities and States. In phase 1, it said sectors where work-from-home is difficult and which provide mass employment could be re-started to protect low-wage employment. They include manufacturing and transport.
In phase 2, which could start 2-3 weeks after phase 1, other sectors could be allowed to start. “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.”
Truck drivers and migrant workers willing to come back should be facilitated, dhabas on highways petrol/diesel stations and repair shops on highways should be opened, it said, adding logistics service providers must extend insurance cover of about ₹10-15 lakh for a period of three months to the workers and their families.
To get back migrant workers, the CII suggested a COVID-19 insurance scheme for three months for which part cost could be borne by the government and part by the industry, besides an aggressive ‘messaging’ campaign.
On the economic front, the CII said it expects GDP growth for the current fiscal to be no more than about 2% with a downward bias.
“India should brace itself for what may be a long haul to overcome the public health crisis and the economic crisis precipitated by the corona pandemic,” the industry body said.
Higher credit limit
On relief for businesses, the CII said rather than the government giving direct subsidies to industry, enterprises should be supported through banks via enhanced credit limits for working capital, additional working capital limits — equivalent to April-June wage bill of the borrowers, backed by a government guarantee at 4-5% with a refinance guarantee from the RBI. Additional reconstruction term loans can be given to MSMEs and stressed sectors.
“Our estimates are the economy would need a credit expansion of 14-15%. Therefore, we would request the RBI to extend support to the industry,” it said. There is also a need to pre-empt failure in the banking sector, it said.
While the steps announced by the RBI Governor on March 27, adequately addresses the potential liquidity issues that will arise in the system, it is eminently possible that the pain would soon manifest in terms of capital and solvency in the system.”
Stating the economy cannot afford a bank collapse, the CII proposed the government set up a fund of ₹30,000 crore “that could be used by banks that meet certain criteria and under specified conditions.”
