coronavirus and the lockdown that has stalled economic activity.
On Thursday, Prime Minister Narendra Modi spent several hours with finance minister Nirmala Sitharaman and her team of officials to discuss the contours of the proposed package, which followed several rounds of consultations at different levels.
Sitharaman is understood to have sought inputs from line ministries, states, sections of industry and other stakeholders to work out a detailed plan. The view in the government has been that its immediate priority should be to address problems of the poor and migrant labour affected by shuttered workplaces while it seeks a clearer assessment of the economic fallout — a process that seems to be nearing completion.
The extension of the lockdown till May 3 has triggered fresh demands for a stimulus as companies are finding it difficult to pay salaries and meet other costs because of the loss of a large part of their revenue. “We are alive to the problem, the government is sensitive to issues. We’ll try to address the problems in a comprehensive manner,” a senior government official told TOI. The PM has recognised the blow that the highly infectious virus has dealt to the economy, which is why he has repeatedly asked businesses to take care of their employees, the official added.
In recent days, international agencies have reduced the global growth forecast with those such as the World Bank, the IMF and Goldman Sachs pegging it between 1.5% and 2%. On Thursday, SBI reduced the projection for the current financial year to 1.1%.
Last month, Sitharaman announced a Rs 1.7 lakh crore package for the poor through a mix of direct cash transfer, free foodgrains and LPG cylinders, among other benefits, for three months. Tax and other compliance burden was eased earlier.
While sector after sector has come up with a long wishlist, which includes waiver of all charges and levies, the government is mindful of the need to be pragmatic and ensure its package spurs growth. A major handicap is the limit to which the fiscal situation can be stressed given the need to step up spending by providing money to individuals for basic needs, while also ensuring that there is scope to roll it back once the situation improves. After direct transfers for the poor in the Rs 1.7 lakh crore package previously announced, more measures are expected.
“Our approach on the economy revival package is thus two-fold. One, fiscal expansion directed towards the bottom of the pyramid and, two, enhanced credit to industry through banks,” said CII director general Chandrajit Banerjee.
For companies, cash flow is proving to be a major issue given that sales have dried up and payments from buyers have stopped. “What is required is increasing liquidity and availability of cash flow with companies. The least-cost option is to give people loans where interest subsidy is given along with back-up insurance for banks like the facility for small businesses, said Ficci secretary general Dilip Chenoy.
Industry bodies are also arguing that without supporting large companies, which buy goods and use services of smaller businesses, the package will be inadequate.