Ficci President Sangita Reddy has written a letter to the Finance Minister Nirmala Sitaraman seeking immediate support for the Indian economy suffering due to the coronavirus caused pandemic. In the letter, Reddy highlighted the need for additional fiscal support of Rs 4.5 lakh crore at the current juncture besides a quick release of Rs 2.5 lakh crore stuck in refunds and other government payments.
Reddy also made a case for the need to create a self-sufficiency fund for innovation, construction and manufacturing clusters to make use of the emerging opportunities in the wake of disruption in global supply chain.
The fund can be provided in tranches in the medium term, she said.
Seeking an “immediate support”, Reddy said the problem being faced is largely that of liquidity, and immediate release of money stuck in refunds and other government payments to the tune of Rs 2.5 lakh crore will immensely help tide over the crisis.
“This may have already been provided for in the budget,” she said.
Further, additional fiscal support is required for vulnerable communities over and above the sum provided for in the Garib Kalyan Yojana announced earlier.
Fiscal support is also needed for MSMEs in order to help them get back on track. Besides, funds are needed for upgradation of healthcare infrastructure to effectively deal with the current situation and for support to sectors like aviation and tourism that have been hit hard due to the lockdown.
“Additional fiscal support required at the current juncture for this purpose is about Rs 4.5 lakh crore,” the letter said.
The fiscal support sought includes “small amount” of Rs 10,000 crore towards proposed COVID-19 liquidity bridge required to give comfort to banks to restructure/ provide additional loans to large companies whose balance sheets have been impaired due to the virus outbreak, it added.
“Government may need to provide for about Rs 30,000-40,000 crore as a guarantee to banks over a 4-year period and in the current year, it can provide about one-fourth of that amount. This small amount will have a huge positive impact on these companies and their supply chain that includes several small and medium sized vendors, which otherwise may not survive the current crisis,” the chamber said.
The central government had imposed a 21-day lockdown from March 23 to check the spread of coronavirus. The lockdown has been extended twice, though with some relaxations. This ongoing lockdown has severely affected the economic activities throughout the country.
In order to ensure that weaker sections of the society “continue to get basic amenities and do not get impacted” during lockdown a Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Package (PMGKP) was announced by the Finance Minister on March 26.
Other than this, the government has also been providing cash transfers to Jan Dhan accounts held by women.
The RBI on its part has sharply reduced the key short-term lending rate with an aim to spur credit disbursement. It also announced a Rs 50,000 crore special liquidity facility for the mutual fund sector in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects therefrom.