CII writes to PM seeking fiscal stimulus, tax cuts to combat coronavirus impact on economy

Industry body CII on Friday pressed for a fiscal stimulus of Rs 2 lakh crore besides a slew of tax cuts and reduction in interest rates to combat the impact of coronavirus on the industry as well as the economy.

Business is going to see a huge amount of disruption, CII Director General Chandrajit Banerjee said, adding sectors like real estate, aviation, tourism, and aggregators are witnessing maximum stress due to coronavirus-induced slowdown and supply chain issues.

In a letter to Prime Minister Narendra Modi, CII said the government may consider a fiscal stimulus of Rs 2 lakh crore, which is 1 per cent of the GDP, to be given to the needy citizens through Aadhaar-based Direct Benefit Transfer. An amount of Rs 5,000 for each individual, especially the rural and urban poor and Rs 10,000 for the most vulnerable section - the elderly.

"Our plea for more fiscal space is really directed to lessen that economic fear of individuals, give money into the hands of people by direct benefit transfer in a mechanism which will really help people get money, to those who are less privileged in the society," Banerjee told PTI.

The Confederation of Indian Industry (CII) has also appealed to senior executives to explore ways to take pay cuts to meet the cost challenges.

The industry body has decided to take certain proactive steps at this stage which will need to be scaled up and revisited as the pandemic progresses.

"For one, we are asking all our members to explore possibilities of all blue-collar employees and contract labourers we have engaged at our factories and service lines.

We also firmly believe that we as senior top brass in our firms should explore ways to take pay cuts to meet cost challenges," CII said in the letter.

It also sought easing the cost of capital, which is currently under wide volatility. The government may consider removing Long Term Capital Gains tax of 10 per cent and fixing the total Dividend Distribution Tax at 25 per cent.

Moreover, CII has suggested that GST payments should be on collection of bills rather than on raising of invoices. This will help avoid liquidity getting locked in case there are delays in payments, it said.

It also recommended a reduction of 50 basis points in Cash Reserve Ration (CRR) as well as in repo rate to ensure that banks have liquidity to lend to industry.

It said the RBI may consider relaxing the NPA recognition norms from 90 days to 180 days till September 30, 2020 to provide relief to industry faced with payment issues as well as pressure on banks to classify loans as NPAs.

"These immediate measures will help industry and economy manage the economic impact and also help the banking sector tide over the stress of NPAs due to delayed debt servicing arising out of disruptions in business operations especially of SMEs," said CII.