COVID-19 Lockdown: Businesses Seek Govt Intervention to Survive

“Key to resetting the economy is to get cash generation going,” here’s what businesses want from govt for revival.

Industries say the only way businesses can get back on their feet is if liquidity is injected into the market. 

(Photo altered by: The Quint/Aroop Mishra)

Like all businesses, the real estate sector has been hit hard by the COVID-19 lockdown. With construction work coming to a screeching halt, labourers are making their way back home to other states amid lack of demand from buyers, as builders say there’s no liquidity in the market to run the business.

Breaking down the severity of the crisis that the sector faces, Niranjan Hiranandani, president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said, “7.5 to 8 percent of the GDP in India is real estate. 15 percent of the labour force in India is in construction and real estate. There is Rs 6.9 lakh crores lying of the banks with the RBI in reverse. Instead of that coming to you and me and our companies and real estate and builders and promoters and shopkeepers, the money has gone back into the reserve bank. That needs to come down and we need to cut the reverse repo rate to 1 percent.”

Highlighting that the need of the hour is for injecting liquidity into the market for businesses to get back on their feet, Hiranandani added that GST should be cut by 50 percent for the next six months. This should be done to restore demand in not just the real estate sector but every single industry. He further stated that the RBI needs to permit a one-time roll over of all the debts as of March 2020.

“The government needs to make its payment. They tell the builders to pay its workers, but they are not paying. They are not paying IT refunds, GST refunds, they are not paying NHAI payments, DISCOM payments, fertiliser subsidies. They are not paying the dues of the state government on GST. Their PSUs are not making payments. This is coming in itself to Rs 2.2 lakh crore.”

Niranjan Hiranandani, President, ASSOCHAM 

“That money that is lying with the RBI, the only way you can really get it to industry and business and stuff is to give some sort of a credit guarantee to the banks for lending. An incremental lending, we have suggested it should be 40 percent credit guarantee for incremental lending,” he added.

Stimulus package to revive economic growth should be Rs 14 lakh crore, he added. This is midway to the Rs 10 lakh crore suggested by NITI Ayog and the Rs 16 lakh crore package suggested by FICCI.

Another challenge with regards to persuading migrant labourers to return to work can be resolved once industries open up, says Niranjan Hiranandani. “They must get to know through their mobiles or phones or whatever systems that there is work in Mumbai, there is work on the highways, ports and we need labour. Then they will come. In the meantime, if they are going to their villages and getting money through MNREGA and also getting part time work on the farms, why will they come back to work?”

Retail Industry Seeks Govt Support to Survive

Another sector that has reached out for government support to survive and reboot is the retail sector. With businesses shut since March, The Retailers Association (RAI) of India appealed to the government to come up with stronger policy and fiscal interventions in the form of support for wages, moratorium for payment of principal and interests and working capital.

RAI pointed out that the industry employs about 46 million people and while food and essentials contribute to around 50 percent of this, non-essentials make up the other 50 percent. At least 20-25 million people are employed by non-essential industries. They further added that if the retail doesn’t open, it could have a cascading effect. If a million people lose their jobs, this will impact at least 5-6 million livelihoods.

“The key to resetting the economy is to get cash generation going. Exports will not be a silver bullet for India. Driving domestic consumption in a safe way is going to be important. A large part of retail is based on non-essential items; we must revive that, even as we continue providing for essentials. The industry will need handholding in the form of financial support for around 6-9 months to emerge from the crisis.”

Kulin Lalbhai, Executive Director, Arvind Limited 

Lalbhai further added that to ensure safe shopping, malls can have the best standard operating procedure and ensure social distancing. Managing Director of Phoenix Malls, Atul Ruia, agrees, “The back-end of the industry cannot function if the front-end isn’t operating. We could implement measures in malls such as restricted operating hours (especially during non-peak hours); social distancing protocols; vacant seats between patrons in cinema halls; partitions between customers in restaurants; hand sanitizers and temperature checks at entrances; and masks for all retail staff. The tenants in malls are all organised retailers; they will abide by all such rules and best practices.”

Bata CEO, Sandeep Kataria, believes that only when consumption picks up can production take place at full speed. The Retailers Association of India has sought at least 2-3 months of revenue to pay salaries to employees and a moratorium of up to 9 months on payments of loans to tide them over.