Industry calls for 'substantial' economic stimulus

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SME Times News Bureau | 23 May, 2021
A substantial stimulus would be required to create effective strides for futuristic economic growth trajectory amid the pandemic, said Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry.

Though economic activity recovered to pre-Covid levels in March 2021, the rapid re-spread of corona cases in second wave of Covid and resultant strict restrictions in many parts of the country have posed severe challenges to double digit economic growth in FY 2021-22, Aggarwal said.

"A substantial stimulus to create effective strides for futuristic economic growth trajectory would be crucial in this extremely difficult time," he said.

There is a need to lower interest rates for consumers and businesses, lesser compliances for MSMEs vis-a-vis ease of doing business at the ground level and a lower tax regime to increase the personal disposable income of the people, Aggarwal added.

PHDCCI Economic & Business Momentum (EBM) Index of 25 lead economic and business indicators has registered an increase in March 2021 to the level of 99.9 as compared to 99.5 in February 2021 and 99.7 in January 2020, said statement by the chamber.

Lead economic and business indicators such as cement, steel, consumer durables, GST collections, external commercial borrowings and FDI equity inflows have shown a marvelous improvement in March 2021, said Sanjay Aggarwal.

"However, the second wave of Coronavirus has swamped the country at a rapid rate with more severe impact than the previous wave in 2020," Aggarwal said.

The partial or complete lockdowns in many states and strict restrictions in various regions across the country have created an uncertain economic environment, with depressed demand and investment scenario, said Sanjay Aggarwal.

The supply chain disruptions are causing skyrocketing commodity prices, which have severely impacted the price cost margins of the businesses in the difficult pandemic time of coronavirus. The increase in costs of raw materials is affecting the MSMEs which are already struggling because of pandemic impact and squeezed working capital, said Sanjay Aggarwal.

Households are shifting their savings towards fulfilling the medical needs of their family members along with deferment of their expenditure on non-essential items, he added.

According to him, at this juncture, the government has to step up with proactive and calibrated measures to mitigate the daunting impact of Coronavirus 2.0 on people, industry, trade and economy, as it did during the last year in 2020.

On the basis of recent movement of PHDCCI EBM Index, PHD Chamber projects more than 1 per cent growth rate of GDP in Q4 FY 2020-21 and overall GDP growth of FY 2020-21 at (-) 7.9 per cent.

Going ahead, to attain a higher growth trajectory, effective policy measures are needed once again to support demand creation and to have a multiplier effect on enhanced production possibilities, expansion of employment in factories, expansion of capital investments and overall virtuous circle of growth and development of Indian economy, said Aggarwal.