Growth in the third quarter (October-December) slowed down to 4.7% and the impact of the Covid-19 outbreak is likely to pull it down further in the fourth quarter, said the industry body.
“Fiscal and monetary stimulus measures need to be announced urgently," said Chandrajit Banerjee, director general at CII.
On Thursday, Prime Minister Narendra Modi had announced the formation of an economic response task force to help cope with the impact of the outbreak, which has not only disrupted supply chains from overseas, but is also now threatening to impact domestic production, as quarantine measures have restricted the movement of workers.
CII said the government should consider providing a strong fiscal stimulus to the extent of 1% of GDP, or ₹2 trillion, to the poor, which would help them financially and also spur consumer demand. It has also suggested removing a long-term capital gains tax of 10% and fixing the total dividend distribution tax at 25%.
The industry body has also urged the Reserve Bank of India (RBI) to undertake an immediate repo rate reduction of 50 basis points along with a 50 basis points reduction in cash reserve ratio to ensure sufficient liquidity and cheaper funds.
CII also urged the central bank to consider relaxing the non-performing asset recognition norms from 90 days to 180 days till 30 September.
Central banks globally are taking fiscal measures to mitigate the economic damage caused by the virus, said Niranjan Hiranandani, president of the Associated Chambers of Commerce and Industry of India (Assocham).
“India, being the fifth largest economy in the world, cannot be found lagging far behind in taking due rectifying actions in time. The time is then perfectly ripe for RBI to roll out monetary/ fiscal stimulus to protect business from going bankrupt," he said.
Hiranandani suggested a moratorium for debt servicing that includes principal and interest, reduction of interest rates, and rescheduling of loan repayments. Rating agencies may continue to carry out their surveillance, they should be asked not to downgrade ratings for a while, he said.
“These measures, implemented on an urgent basis, have the potential to prevent the grave economic crisis that is on the horizon. It is no longer about investors and business. This is about the economic health of the country. The time to take action is right now. We need implementation on a war footing if we are to save the Indian economy from tanking," said the Assocham president. “March end is the most crucial period for all the companies to knock out the outstanding liabilities and achieve financial closure," said Hiranandani.
The Federation of Indian Chambers of Commerce and Industry (Ficci) said: “There was a strong hope of (economic recovery) in the last quarter of the current fiscal. However, the coronavirus epidemic has made the recovery extremely difficult in the near to medium term."
As much as 53% of Indian businesses have indicated a marked impact of Covid-19 on business operations, showed a Ficci survey. Around 42% of the respondents said that it could take up to three months for normalcy to return, added the survey.
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