FICCI calls for Rs 10 lakh cr stimulus

May 11, 2020 13:04

There is a critical and immediate need for a significant stimulus of Rs 9 lakh crore to 10 lakh crore or four to five per cent of the GDP to stimulate demand and supply for averting a long-term economic slowdown, the Federation of Indian Chambers of Commerce and Industry said on Monday.

"If we do not help industries (large and small), we will have large-scale job losses which will contract demand significantly and will lead to further pressure on the utilisation of businesses and their liquidity," FICCI President Sangita Reddy said in a letter to Finance Minister Nirmala Sitharaman.

The situation will reduce government tax collections significantly and fiscal deficit will remain high (even without stimulus outflow) if the economic engine does not re-start, said Reddy.

"The socio-economic impact of large-scale job losses and loss of demographic dividend will impact the future course of economic development even in medium-term," she said.

"We are staring at a significant contraction of demand and economy, and a cascading impact of long-term economic slowdown if the economic engine does not re-start immediately. Therefore, it is imperative for the government to immediately support the supply and demand side," she said.

Reddy called for interest-free and collateral-free loans to MSME companies (turnover of less than Rs 500 crore) for an up to 12 months period depending on the sector to enable them to cover fixed costs, salaries and other operational expenses.

For non-GST paying companies, an alternate mechanism may be worked out (based on IT filing).

Even if the government was to give Rs one lakh crore of loans to MSME businesses, the cost of interest payment will be Rs 8,000 crore (assuming 8 per cent lending rate) which is 0.04 per cent of the GDP. This loan can be given with pre-conditions that businesses will continue to run and there will be no layoffs of workers, she said.

After one year, it can be converted into a grant if all conditions are met. Threshold tax collection could be one metric. -- PTI

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