Industry body CII on Friday called for a stimulus of Rs 15 lakh crore to help the lockdown hit Indian industry, particularly the worst hit MSMEs.

By the time the third phase  of the lockdown ends, we would have lost almost two months  of output.  An immediate substantive stimulus is required from the Government in the form of support to the poor and support to industry especial ly the MSMEs, said CII in a press release.

“With economic activities being restricted for over 50 days now, the  negative impact on the e conomy is expected  to be even more  significant th an  what we had earlier anticipated. This nee ds  to be  offset  by a large fiscal stimulus so that  jobs and  li velihoods are  protected. CII recommends the gover nment to announce an immediate stimul us package of at Rs 15 lakh crore, which translates into 7.5% of GDP “, said Vikram Kirloskar, Pr esident, Confederation of Indian Ind ustry.

The broad elements of the stimulus inc lude cash transfers amounting to Rs 2 lakh cro re to JAM account holders, in addition to the Rs 1.7 lakh stimulus already announced. “A key fall ou t of this economic slowdown would be the human cost in terms of loss of jobs and livelihoods, wh ich need urgent government intervention”, said Chandrajit Banerjee, Director General, CII. 

It should be ensured that the migrant labourers are kept within the purview of the proposed cash transfers, Mr Banerjee added.

Further, in order to provide enterprises the immediate support to pay salaries to its workers and avoid any job losses, CII has suggested a provision of Rs 2 lakh crore for additional working capital limits to be provided by banks, equivalent to April-June wage bill of the borrowers, backed by a Government guarantee, at 4-5% interest.

To support the estimated 63 million MSMEs which have been battered by the pandemic, CII has suggested a  credit protection scheme  for  MSMEs  whereby  6 0-70% of the  loan should be guaranteed by the government, i.e. if the borrower defaults, government should repay the bank upto the amount  it has guarantee d, so the risk to the lender is limited. This will encourage  the banks to lend to the ailing sector so that their working capital needs are met.

In addition, CII has suggested the creation of a fund or SPV with a corpus of Rs 1.4-1.6 lakh cr ore which will subscribe to NCDs/Bonds of corp orates rated A and above. The fund can be seeded by the Government contributing a corpus of Rs 10,0 00-20,000 crore, with further investments from banks and financial institutions. 

This will provide adequate liquidity to industry, particularly the stressed sectors such as aviation, tourism and hospitality.

In order to create a significant multiplier impact on boosting demand in rest of the sectors and enhancing long-term productivity, funding public infrastructure has been found to be a potent
option. In this regard, we suggest an allocation of Rs 4 l akh crore be made on a public works programme that will create job opportunities. The work should be initiated with the involvement of state  governments,  so that  implementation bottlenecks can be overcome.  Specifically, the spending can begin with the completion of projects that have already begun, such as roads which are stalled after 80% of the job is complete.

CII has also suggested an allocation of Rs 2 lakh crore to be earmarked  for bailing out state-run electricity distribution companies that have been accumulating losses and burdening the state- exchequer.

Further, to protect our financial sector for meeting the credit needs of the real sector, as well as abs orb some shocks from potential insolvencies in the real sector, an allocation of Rs 2 lakh crore for bank re capitalization is required. This will help public sector banks manage any surge in the ir NPAs.

In order to finance the broad elements of the stimulus package laid out above, we suggest Rs 4 lakh crore support  from the subscription of government  paper  by the RBI, given  the fact that inflationary pressures  remain muted in view of depressed  demand conditions.