CII writes to PM Modi, seeks fiscal stimulus package of Rs 2 trillion
Suggests setting aside 1% of GDP for cash transfer scheme for poor and elderly
To battle the current coronavirus disease (COVID-19) crisis, a fiscal stimulus of 1 per cent of India’s gross domestic product needs to be provided by the government through direct benefit transfer to the poor and elderly immediately, the Confederation of Indian Industry (CII) has told Prime Minister Narendra Modi.
This would be in line with steps taken by other major economies like the United States, France, Japan and the United Kingdom, which have announced billions of dollars worth of stimulus to their economies.
In a letter to the PM sent on Wednesday, the industry body stressed the need for easing the cost of capital. It has renewed its demand for the removal of long-term capital gains tax of 10 per cent and fixing the dividend distribution tax at 25 per cent.
However, as an immediate measure, CII has suggested that Rs 5,000 be provided to every poor person, the majority of who work in the informal economy and face the brunt of business slows down. It also wants the most vulnerable section — the elderly — to get Rs 10,000 each, and free distribution of one month’s ration to those below the poverty line from the government’s stocks.
The Periodic Labour Force Survey data currently counts 200 million casual laborers in the country, who CII said could benefit with the transfers, and could help drive consumer demand. The industry body has argued that the recent crash in global oil prices allows the government to fulfill this demand. “Every $10 dollar decline in oil price leads to a saving of $15 billion in the oil import bill,” CII said.
It also pushed for Goods and Services Tax (GST) payments to be on the collection of bills, rather than the raising of invoices to avoid liquidity getting locked during delays in payments. Such pending payments, especially to the micro, small and medium enterprises sector currently stand at Rs 6 trillion, according to government statistics.
CII has also listed a host of immediate monetary and banking reforms including a reduction of 50 basis points both on Cash Reserve Ratio as well as the repo rate to ensure suitable liquidity for banks. Along with other industry bodies, it has also demanded that the Reserve Bank of India relax norms for recognising non-performing assets from 90 days to 180 days till September 30 to provide relief.
Over the past few days, India Inc has demanded that the central bank announce a blanket moratorium on debt repayments for 60 days to help firms tide over immediate cash flow issues. CII has suggested that credit limits for all regular banking accounts be enhanced by 25 per cent.
To address the shortage of easily available, cheap drugs, the industry body has suggested shoring up indigenous Active Pharmaceutical Ingredients (API) production. While in 2018-19, pharmaceuticals exports were worth $19.13 Billion, a study by the commerce ministry found that 70 per cent of APIs continued to be imported from China. Now, this over dependence has led to pricing volatility and supply disruption that has led to concerns of a shortage.
For the beleaguered aviation sector, CII has sought an immediate 4 per cent cut to the Value Added Tax levied by states on Aviation Turbine Fuel (ATF). In the long run, CII says ATF needs to be brought under the ambit of the GST regime to enable full input tax credit.