CII suggests immediate stimulus package worth `15 lakh crore

NEW DELHI: Industry body CII on Friday suggested that the government should immediately announce a stimulus package of Rs 15 lakh crore, or 7.5 per cent of the GDP, observing that the COVID-19 pandemic has led to “deep distress” in the Indian economy.

“The COVID-19 pandemic, which came as a bolt from the blue, is hitting economies around the world very hard. And India hasn’t been an exception to this crisis, with the Indian economy likely to witness a contraction this year,” CII said in a report.

A substantive stimulus is required from the government in the form of support to the poor and to the industry, especially MSMES, it said, adding that the pandemic itself is expected to persist till the time a cure or a vaccine is found, which may be 12-18 months away.

“The recovery process is also expected to take around two years, at the least. Therefore, the fiscal stimulus is needed immediately,” said CII.

In order to finance the broad elements of the stimulus package laid out above, the industry body suggested Rs 2 lakh crore support from the subscription of government paper by the RBI, taking into account that inflationary pressures remain muted in view of depressed demand conditions.

An equivalent amount of Rs 2 lakh crore can be borrowed by the government from secondary market, so that bond yields remain moderate, CII suggested. A substantial reduction in expenditure of around Rs 4 lakh crore is also possible by reducing some of the discretionary expenditure such as centrally sponsored schemes.

These are some avenues that would finance the package, it said.

“With economic activities being restricted for over 50 days now, the negative impact on the economy is expected to be even more significant than what we had earlier anticipated. This needs to be offset by a large fiscal stimulus so that jobs and livelihoods are protected. CII recommends the government to announce an immediate stimulus package of at Rs 15 lakh crore, which translates into 7.5 per cent of GDP,” CII President Vikram Kirloskar said.

The Confederation of Indian Industry (CII) said the broad elements of the stimulus may include cash transfers amounting to Rs 2 lakh crore to JAM account holders, in addition to the Rs 1.7 lakh stimulus already announced.