Industry Body FICCI Warns Of Massive Job Losses, Calls For Package Worth 4-5% Of GDP

Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) on Monday expressed concerns about large-scale job losses due to the economic distress caused due to the coronavirus pandemic and the resultant lockdown, and urged the government to roll out a stimulus package of Rs 9-10 lakh crore (4 to 5 per cent of GDP). "If we do not help industries (large and small), we will have large-scale job losses which will contract demand significantly and will lead to further pressure on the utilisation of businesses and their liquidity," FICCI president Sangita Reddy wrote in a letter to Finance Minister Nirmala Sitharaman.

Regarding MSME Sector

In the letter, Ms Reddy also raised the demand of "interest-free and collateral-free" loans to micro, small and medium-scale enterprises for a period of 12 months. Various industry and sector-specific bodies have been raising the issue of supporting the smaller enterprises as the government has not yet rolled out any package or scheme specific to them. The letter stated that such a loan would enable the sector to cover fixed costs, salaries and other operational expenses.

"Even if the government was to give Rs one lakh crore of loans to MSME businesses, the cost of interest payment will be Rs 8,000 crore (assuming 8 per cent lending rate), which is 0.04 per cent of the GDP. This loan can be given with pre-conditions that businesses will continue to run and there will be no layoffs of workers," Ms Reddy said in the letter.

Job Losses

The letter also harped upon the potential job losses caused due to the stagnant economy. "If we do not help industries (large and small), we will have large-scale job losses, which will contract demand significantly and will lead to further pressure on the utilisation of businesses and their liquidity," the letter stated.

Liquidity

Ms Reddy, in the letter, said the problem is largely that of liquidity and immediate release of money stuck in refunds and other government payments, to the tune of Rs 2.5 lakh crore, will immensely help the situation.

"A COVID liquidity bridge may be created to support restructuring and additional loan requirement of large companies whose balance sheets have got impaired due to COVID. This will have a huge positive impact on the entire supply chain of these companies, including many small and mid-sized vendors, which otherwise may not survive the current crisis," she said.

Infrastructure

Ms Reddy also said there is a need to accelerate infrastructure spend of Rs 1.7 lakh crore already allocated in the Budget to provide immediate impetus to the economy. A significant amount of this money can go towards low-cost housing and road construction.

"Linkage of Pradhan Mantri Gram Sadak Yojana and low-cost housing construction with MNREGA workers will have a multiplier effect on the economy by putting money in the hands of people and energising 200-odd sectors related to construction. This will give significant impetus to growth," the letter added.