Government should provide Rs 3 lakh crore stimulus to shore up demand: CII president Narendran

CII President T V Narendran

The Confederation of Indian Industry (CII) has urged the government to provide a fiscal stimulus worth Rs 3 lakh crore along with direct cash transfers to raise flagging domestic demand.

In his first press conference after taking charge, CII's new president TV Narendran, who is also the CEO and Managing Director of Tata Steel Ltd, said the government has the room for the stimulus, which would amount to 1.3 percent of India's GDP.

Assuming unchanged revenue in the budget, "an expansion of the deficit to 8 percent of the GDP will entail additional spending (of) about Rs. 2.6 lakh crore," Narendran said. He added that to fund the deficit, the Reserve Bank of India (RBI) would need to expand its balance sheet, as it has been doing.

Direct cash transfers through Jan Dhan accounts and an enhanced MGNREGA allocation should be attempted by the government to raise domestic demand hit hard by coronavirus outbreak, CII has suggested.

The move is also necessitated for quickly restarting the private investment cycle, Narendran said. "The Indian economy is a consumption-driven economy with it accounting for over 60 percent of GDP, and the cumulative impact of two waves on incomes, livelihoods and customer sentiments coupled with an increase in household medical expenses, are likely to have an impact on consumer demand for some time," Narendran said.

He has also called for relief measures for the financially stressed population, including a reduction in excise duty on fuel, time-bound tax relief, interest subventions for homebuyers and short-term cuts on GST rates. The time was also opportune to include aviation turbine fuel into the GST regime, he said.

Macro policy 

The CII president also called for a further recapitalisation of public sector banks to the tune of Rs 20,000 crore in addition to a similar amount provisioned in the budget.

"The pandemic would be a setback to financial institutions which had been making progress in dealing with non-performing assets (NPA). Public sector banks continue to be the largest source of credit for the Indian industry and as the economy recovers, the banks would need to meet the credit needs and absorb the impact of a possible increase in NPAs," Narendran said.

The government should set up a "national pandemic pool", as the coronavirus outbreak had shown the importance of risk management and insurance solutions.

"The government has a role to play in the allocation of a corpus towards creating a pandemic pool to cover the risk of losses from future pandemics, including loss of jobs and profits due to business interruptions," he said.

MSMEs and job creation

Micro, small and medium enterprises (MSMEs) should be given a special push along with timely clearance of dues, he said. The Rs 3 lakh crore emergency credit line guarantee scheme (ECLGS) announced last year to alleviate cash trouble of MSMEs be expanded to Rs 5 lakh crore and extended to March 31, 2022.

While the government had recently expanded the scope of the scheme in its third makeover, CII wants it extended to retail and machine tools sectors, both of which have a large number of firms.

"There is not only a need to take a look at the ease of doing business, as the government has done over the past few years, but also monitor and reduce the cost of doing business," Narendran said to a question on job growth in the manufacturing sector.

Apart from extending the Aatmanirbhar Bharat Rozgar Yojana, the government's flagship initiative to raise employment in the formal sector, to March 31, 2022, CII has also pushed for an LTC tax voucher scheme, similar to the one announced last year.

A renewed focus on labour-intensive sectors like textile, leather and electronics would lead to quicker job growth, he said.

On the Reserve Bank of India, Narendran said CII was not seeking a further rate cut but was asking that a rate increase not be attempted for the time. At its recent monetary policy review, the central bank left its key rates unchanged.

CII will also be setting up three new national centres focused on new technologies and innovation, dedicated to artificial intelligence, design and IP creation and technology management, the new President has announced.