India Inc awaits fiscal push from Centre to keep afloat
Centre has hinted at a package but is yet to announce one; countries like US, UK have already pumped in billions
nNEWDELHI: As businesses around the country reel under the impact of the Covid-19 pandemic and the lockdown it has necessitated, business owners, executives and experts are looking to the government to do enough to keep companies afloat and healthy and, more importantly, to ensure that they do not engage in mass retrenchments.
The government has hinted at a fiscal package – but is yet to announce one – and 11 days into the three-week lockdown to stop the spread of the pandemic, everyone is beginning to get just a little restive. “The US has announced a package that is 10% of its GDP; the UK 15%; what have we done?” asked a senior executive at a large Mumbai based fund who asked not to be named. Sure, the US package also includes cheques to individuals, but it does have payments to businesses, especially the worst affected by the pandemic.
Officials in the finance ministry said on condition of anonymity that the ministry is monitoring the economy and will respond to any need, but declined to comment on a relief package.
There is broad agreement that the Indian economy will expand at its slowest pace in years in 2020-21. Fitch Ratings expect it to grow by 2%, the slowest in 30 years. The minority view is that it could actually contract. Nomura Global Market Research expects it to, by 0.5% for the calendar year 2020. And unless there’s a strong incentive for employers to not lay off people, they will, a human resources consultant said on condition of anonymity.
France, for instance, started off by deferring tax payments and payroll charges companies pay the government for the month of March. It is said to be mulling a larger bailout for firms.
“At the top, support needs to be provided for the employers -- they need liquidity support. This can be facilitated through deferral of tax liabilities, exploring guarantee modalities for credit enhancement in working capital loans allowing higher limits of borrowing, direct benefit transfer by way of 25% salaries to registered enterprises with employees registered under EPF for companies with a specified turnover limit for a period of two to three months. This will limit layoffs or provide succour where layoffs are there,” said Ranen Banerjee, leader-economic Advisory Services, PWC India.
India has announced a relief package for the most vulnerable – food and cash payments totaling 1.7 lakh crore – and relaxed some statutory requirements for companies. The Reserve Bank of India has also strongly addressed the liquidity needs of the financial system (by effectively releasing ₹3.74 lakh crore of liquidity), and ensured its stability.
But India has not offered the kind of direct relief to companies, especially large employers, that some other countries have announced. Nor has it announced relief for the salaried class – in the absence of any relief to companies, the HR consultant said companies could cut workforce “to the bone”.
Deepak Sood, the secretary general of industry body the Associated Chambers of Com
Bengaluru, Dakshina Kannada district merce and Industry said an immediate stimulus package of “$100 billion to $120 billion will help revive all sectors in the country”.
The consensus among most people HT spoke to is that more than sector-specific relief, generic relief – deferred tax, even tax holidays, and other such – is what is needed now. “Businesses should not be allowed to become bankrupt during this period of crisis. The government should defer tax payments of Q1 -- both direct and indirect tax payments – by a quarter,” said Chandrajit Banerjee, director general of industry body Confederation of Indian Industry (CII). The industry body has also suggested that the government could provide a waiver for all provident fund and gratuity payments by employers for one year if the employer does not retrench or remove more