Economy will need $200 – $300 bn stimulus: ASSOCHAM

Panchanan Mishra

AssochamMany industry bodies have started estimating the cost of the COVID-19 impact on the economy, while chalking out plans to emerge out of the inevitable recession that will follow.

Calling for exceptional measures to beat what it foresees as one of the deepest global recessions, industry association ASSOCHAM has drawn up a 16 point agenda for the Indian economy. It has estimated that a stimulus package of at least $200-$300 billion will be needed.

In a letter to Finance Minister Nirmala Sitharaman, ASSOCHAM President, Dr. Niranjan Hiranandani, has said that in keeping up with most of the leading world economies stimulus measures will involve nearly 10 per cent of the Gross Domestic Product (GDP). That would imply a transfusion of over $200 billion, with an ability to go up to $300 billion, over the next 12-18 months.

ASSOCHAM estimates that of this amount, $50-100 billion might be needed in the next three months to check prospects of job loss and loss of income.

ASSOCHAM Secretary-General, Deepak Sood said, “It will be critical to ensure three objectives: Immediate assistance to employees and labour through direct transfers and through employers, ensuring that companies have enough cash flow to survive the downturn, and finally stimulating demand and investment to revive the economy through fiscal and tax measures.

The Secretary-General said the government also needs to modify the FRBM Act to consider the debt/GDP ratio as a metric and not fiscal deficit.

“The government needs to set an example for other businesses with no bills being unpaid for more than 15 days. This will enormously help the credit cycle and will also bring down tender prices for everything.”

He also said that the government should implement the National Infrastructure Plan without losing time, once the lockdown is completed.

Some of the key recommendations to the Finance Ministry include, a one-time loan restructuring to all corporates, assuming a principal repayment start date moving upwards from March 2021, NCLT provisions to be held in abeyance for 6 months and a further reduction of interest rate/repo-rate by another 100 bps by the Reserve Bank of India.

ASSOCHAM has also recommended reduction in GST across the board by 50% for 3 months and 25% for the fiscal.

For the real estate sector, ASSOCHAM has recommended that Section 43CA and 23 (5) which deals with selling properties less than 10 percent of the circle rates and taxing of developers inventories for the notional rent be scrapped immediately. It has also urged that the 5 per cent GST on under-construction real-estate be scrapped or given a full input tax credit.