Covid-19: Rescuing India Inc. From The Coronavirus

From loan moratoriums to tax exemptions to direct cash transfers—what virus-hit Indian business wants in an economic package.

File photo: Prime Minister  Narendra Modi with Finance Minister Nirmala Sitharaman at a public rally in Amethi, Uttar Pradesh (Photograph: PTI)
File photo: Prime Minister Narendra Modi with Finance Minister Nirmala Sitharaman at a public rally in Amethi, Uttar Pradesh (Photograph: PTI)

“We’re not seeing the light at the end of the tunnel,” says Harsh Mariwala as he describes the initial impact of the coronavirus-led disruptions on businesses, already hurting due to a slowing economy. Experts estimate India’s GDP growth this fiscal to decline to as low as 4.5 percent.

Mariwala is chairman of Marico Ltd., a consumer goods company that sells market-leading brands in the hair oil, cooking, and nutritious foods categories. That business has seen a momentary surge in sales due to panic buying, but at Kaya Ltd., the chain of skin clinics he also leads, business is down 30 percent as the fear of infection and social distancing norms keep customers away.

“I think the impact is on various fronts,” he says, speaking of the industry at large in an interview with BloombergQuint.

There is a universal supply impact on many companies—because of supplies (trade slowdowns), there is a demand function, there is the financial impact—which covers the capital markets, which covers cash flows, which covers payments to employees, because the business is down. So we are going to see a lot of bloodbath on the streets if this persists, in terms of bank lapses, and people are not able to honour their commitments. So it’s going to be very tough.
Harsh Mariwala, Chairman, Marico

At JSW Steel Ltd., one of the country’s largest steel producers, Sajjan Jindal says the immediate impact on business has been marginal, but we “don’t know what will be the effect going forward”. He shared his views via text message.

Currently, manufacturing facilities across sectors continue to work but that too will depend on the spread of the virus and government regulations on further social distancing or lockdowns. And, also on-demand.

Industry leaders fear it could be a long hard summer for businesses, big and small, formal, informal across India. “No one is able to predict how much it (negative impact) will be, because the mood is very low and it’s getting worse day by day,” Mariwala says.

Why Central Banks’ Rate Cuts Have Failed To Impress Amidst Covid-19

‘Need A Rs 3-5 Lakh Crore Stimulus’

In many other countries that have already witnessed an escalation in virus infections, lockdowns across cities and states and massive disruptions to business activity, governments are pulling out the fiscal stops.

  • The U.S. is considering direct payments of $1,000 per adult and $500 per child to Americans.
  • The U.K. announced a massive rescue package of $424 billion worth of government-backed loans, grants and tax cuts for struggling companies.
  • Canada intends to roll out a fiscal package worth 3 percent of GDP.
  • Poland’s government unveiled a package worth $52 billion, or 9 percent of GDP.
  • Czech Prime Minister Andrej Babis pledged aid amounting to $40 billion.
  • Australia is expected to announce its second stimulus plan, amounting to $10.2 billion.

Revival Packages: Highlights

  • Guaranteed loans for businesses that need cash to pay rent or suppliers.
  • Holidays for debt repayment.
  • Tax cuts and grants for businesses.
  • Salary handouts for those unable to work.
  • Income support for the jobless.
  • Mortgage payment holidays.
  • Cash handouts for families.

In India too, businesses are hoping for similar relief. Two business chambers, Assocham and Indian Chamber of Commerce, have offered suggestions to the government that draw from the global rescue playbook.

What Indian Business Wants: Assocham, ICC Proposals

  • Working capital support.
  • Loan moratorium and restructuring.
  • Relaxation in NPA norms.
  • Suitable cut in policy rates to boost consumption and investment.
  • Payroll tax holiday + tax credit for sick leave/work from home.
  • GST concessions: rollover or lower rates.
  • Specific relief to travel, hospitality, retail, entertainment sectors.
  • Cut fuel prices.
  • Stimulus to increase spending power of consumers.
  • Rs 3,000-5,000 per month cash support for certain worker groups.
  • Mortgage holiday for a specified period of one year.
  • Three-month extension for income tax payment
  • Waive utility costs for urban poor.

Jindal’s wish list includes measures beyond lower interest rates (monetary policy prerogative) and loan moratoriums. He proposes a ban on short selling and tax exemption on buybacks, to help stem the precipitous fall in stock prices. India’s key equity indices closed Thursday at three-year lows.

Covid-19: Rescuing India Inc. From The Coronavirus

Jindal proposes a combination of solutions. Mariwala suggests the government should prioritise one or two measures and then consider more. Especially given the tight fiscal situation.

“One is those who have been impacted in terms of incomes—the informal sector where jobs have been lost; some direct benefit transfer, I think that would help. Number two, for businesses, especially certain businesses, which have got badly impacted, whether it's airlines or hospitality or tourism or hotels. I think all of them will need some degree of financial support, not in terms of a waiver of interest and things like that.”

Sangita Reddy, joint managing director of Apollo Hospitals Enterprise Ltd., a leading hospital chain, and president of business chamber Ficci, says business is facing loss in consumer confidence, liquidity crisis and risk of credit defaults, and expects the government will address these urgently. A multi-sectoral, multi-dimensional effort is necessary to “enable the productivity and financial health of companies” and in “ensuring the employees, daily wage workers, farmers are economically protected”.

There is no option but to pull out all the fiscal stops, Reddy says in a phone interview to BloombergQuint. “This has to be done, otherwise the long-term (prospects) of the country will be seriously affected.”

If the Covid crisis is 3-6 months, the recovery cycle, if something significant is not done now, will be 3-6 years. It is very important to not worry about the fiscal deficit. Whether it is Rs 3-5 lakh crore stimulus across the board, for every sector from farming to manufacturing to services to exports, it has to be put into place. I think we have to not waste the crisis, like Winston Churchill said. Never waste a good crisis. We must use this to reset our targets and our approach to business and economy and the play that we make globally.
Sangita Reddy, Joint MD, Apollo Hospitals and President, FICCI

On Thursday night, Prime Minister Modi addressed the nation and urged a self-imposed one day curfew on Sunday—a Janata Curfew as he put it. He also requested citizens to show their appreciation for essential services employees in healthcare and sanitation and other sector, by applauding them publicly at 5 p.m. that day.

As for the economy, he said the finance minister has appointed a task force to look into revival measures.

Meanwhile, some states have kicked into action - Kerala just announced a package of loans, free ration, social security and employment programs. Uttar Pradesh is reportedly working on cash transfers.

Kerala Announces Rs 20,000 Crore Package To Tackle Coronavirus Outbreak

Watch | Interviews with Sangita Reddy and Harsh Mariwala on the economy

Developers Seeks Relief On Loan, RERA Deadlines To Deal With Covid-19