Industry needs to quickly resume operations and increase investments to ride out the Covid-19-induced economic slowdown, Finance Minister Nirmala Sitharaman told industrialists on Wednesday. But it may be easier said than done, said India Inc, highlighting low levels of demand and several challenges being faced by businesses, big and small.
Sitharaman’s virtual conference with senior members of the Confederation of Indian Industry (CII) was designed to gauge industry’s mood on the recent economic package, a senior government official said. The minister was accompanied by all five secretaries from the finance ministry along with the Chief Economic Advisor. Corporate Affairs Secretary Injeti Srinivas also joined in.
CII members flagged the lack of demand, suggesting direct cash transmission into the hands of the poor needs to be stepped up. There is need for further policy reform in certain sectors, such as tourism, automotives and aviation, they said.
Discussions need to be undertaken to protect jobs, increase demand, and ensure survival of large businesses which face unprecedented challenges, the CII said.
“While a lot has been announced in the package, it was pointed out that more needs to be done for sectors that have been left out, including large corporations and exports. Targeted policy changes need to be brought out quickly for these, and then industry can decide on how to deal with the crisis going forward,” said an industry member who attended the meeting.
An unfolding crisis in the labour sector, sparked by millions of migrants leaving cities for the hinterland, was also discussed.
“Even with all government support, there’s no way to get back a skilled labour who has left for at least a couple of months. More coordination with state governments in assuring that labour stays back is the need of the hour,” said another CII member present at the meet.
Sitharaman asked industry to reset its relations with workers, asking for a more professional approach in engaging unskilled workers. “Industry needs to set examples in handling workers in a way that is acceptable to all,” the minister said.
Need for investments
The minister pointed out the need for domestic companies to loosen the purse strings on investments. “The issue is that even in the most optimistic of scenarios, growth projections are currently at 2-4 per cent. The government is pushing industry to double this to almost 8 per cent by sheer investments and scaling up of operations. But we have told them foreign investment flows need to be widened at a much faster pace if this is to be achieved,” said a senior CII functionary.
Sitharaman said the National Infrastructure Pipeline would be given a big push in order to create demand with a multiplier effect. “Large projects would be front-loaded and this would bring in positive energy and sentiment.” Infusion of Rs 90,000 crore into the power sector would be fast-tracked, she said.
The minister hinted there were no plans for liquidity transfusion into micro, small and medium enterprises (MSMEs), instead arguing that access to loans has been made easy.
“She stated that even before Covid-19, clear handholding was announced for MSMEs and non-banking financial companies to help enterprises in rural areas,” the CII said in a release.
“She stated that credit availability for additional term loans and working capital loans was intended to reach all MSMEs, and hence the government has provided a guarantee to banks to overcome hesitation in lending.”
However, sources say CII members suggested more changes to the classification of MSMEs.
MSME Minister Nitin Gadkari on Tuesday hinted that the threshold for medium-sized companies may be revised to an investment limit of Rs 50 crore and turnover limit of Rs 200 crore, up from Rs 20 crore and Rs 100 crore, respectively.
FM to meet PSU banks on Friday
In an unrelated development, Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) on Friday to discuss various issues, including credit offtake, as part of efforts to prop up the Covid-19-hit economy, PTI reported.
The meeting was earlier scheduled on May 11, but due to the stimulus package announcements, it was deferred, they added. The meeting, to be held via video-conferencing, will also take stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments, the sources said.
The RBI had on March 27 slashed the benchmark interest rate by a massive 75 basis points and also announced a three-month moratorium to be given by banks to provide relief to borrowers whose income has been hit due to the lockdown.