India Inc. is in favour of the government announcing a relief package to protect the livelihoods of workers, small enterprises and select sectors battered by the second wave of the coronavirus pandemic, while a stimulus package can wait until the country is fully unlocked.
Though the Centre has not announced a national lockdown during the second wave of the pandemic, leaving inter-state movement of goods and people largely unaffected, localized lockdowns by states have shut non-essential businesses, and the resultant demand compression has small firms struggling to retain their employees. In April, India saw its unemployment rate shoot up to 8%, with 3.4 million salaried employees losing their jobs.
Finance minister Nirmala Sitharaman told reporters after the GST Council meeting on Friday that the government has not made a final call on providing assistance to the covid-hit industry yet. “The budget has been announced only on 1 February. We are in May. We have the entire year to go. The second wave has come. This is not a complete lockdown, but states have had lockdowns. So we are getting inputs. We need to take a call. We need to understand where the impact is, how much it is and so on. So the process of consultation is going on. We have not made any final call on it,” she added.
Naushad Forbes, co-chairman of Forbes Marshall and former president of the Confederation of Indian Industry, said while a stimulus package to kick-start business activities can wait, what is needed immediately is measures to protect employees who have lost jobs or small enterprises such as restaurants and shops who had to shut shop because of the pandemic-induced lockdowns. “Also, sectors such as retail, garments, hotels and hospitality need support. If there is hesitation from people for spending because of the scarring and health concerns, then the government may look at a stimulus package. What’s the point of stimulating people to go out and spend when they can’t get out,” he added.
Assocham secretary-general Deepak Sood said, unlike in the first wave when the focus was on reforms, fiscal measures by the government this time around should comprise direct transfers to those out of work. “MSMEs should be given forbearance for a longer period. Besides, the Reserve Bank of India (RBI) can rework with the banks on loan restructuring, especially in the severely affected sectors. The emergency credit line guarantee scheme (ECLGS) should continue with larger outlays. Since it is the beginning of the fiscal, front-loading of government expenditure and fiscal expansion would be made up with the revival of the economy in the second half of FY22,” he added.
The second covid wave can have devastating long-term effects, and failure to restore confidence and mitigate the losses of households will hurt growth, increase poverty and widen inequality gaps, the Federation of Indian Chambers of Commerce and Industry (Ficci) cautioned in a statement. “While last year several measures were taken to support the supply side, this year, a much greater effort is needed to support incomes and consumption demand. A comprehensive and targeted policy response is the need of the hour. Immediate relief measures are critical to alleviating the economic shocks of two covid waves. Fiscal intervention is urgently needed to support recovery. The government should revisit the budget heads and revise them considering current priorities,” it added.
Ficci said sectors tourism, hospitality, aviation and retail are in dire need of undiluted support, as in many other countries. “A financial package entailing direct-payroll support, credit support and extension of debt restructuring should be considered. The sectors must be given regulatory and compliances relief by easing regulations, lowering the burden of multiple levies, rent and licence obligations and taxes. RBI may also consider a special regulatory dispensation under the restructuring scheme for these sectors with more liberal ratios,” it added.
The MSME sector has been severely impacted due to labour shortage, skyrocketing commodity prices and depressed demand, said Sanjay Aggarwal, president at PHD Chamber of Commerce and Industry. “The government has to step up with proactive and calibrated measures to mitigate the daunting impact of covid on people, industry, trade and economy, as it did in 2020. ECLGS should be extended to ₹6 trillion to save industries with low interest rates, and the repayment schedule of these loans should be favourable and supportive for MSMEs. Effective policy measures are needed to support demand creation and to maintain employment in factories,” he added.
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