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Economic stimulus, GST cuts, easy credit on India Inc?s wishlist to fight slowdown
09-Aug-2019
Financialexpress
GST,GST Cuts
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India Inc on Thursday told the government that the economic slowdown was intense, and it must offer a stimulus package — apart from swiftly ensuring greater and smoother flow of credit at reasonable rates — to stir growth that crashed to a five-year low of 5.8% in the March quarter. In their meeting with finance minister Nirmala Sitharaman, the corporate titans also raised concerns about overzealous taxman and the new corporate social responsibility (CSR) rules that provide for a jail term up to three years for violation. JSW Group chairman Sajjan Jindal said the minister assured that no coercive penal action would be initiated for non-compliance of CSR rules and the government would move judiciously on this move. Assocham president BK Goenka sought a stimulus package of over Rs 1 lakh crore for the investment cycle to pick up.
More steps to get NBFCs back to health and improve their lending ability could be in the offing, with the participants telling the minister that the crisis in the shadow-banking space after the IL&FS default has hit consumption. Purchases in sectors like automobiles that are dependent on NBFC loans to a considerable extent have been adversely affected due to the lingering crisis. Pitching for affordable credit, the corporate leaders said banks would be willing to transmit the benefit of the RBI’s repo rate cuts to borrowers meaningfully only when the government slashed the interest rates on deposits under small savings schemes.
The finance minister is learnt to have assured that she would look into the matter of greater transmission by banks. While the RBI had pruned the repo rate by 75 basis points since February (before the latest reduction by 35 basis points on Wednesday), state-run banks had cut only 10 basis points in the median marginal cost of lending rate for one-year tenor between February and June, said TV Narendran, vice president of CII and MD of Tata Steel. Most private banks didn’t do even that much. While a five-year National Savings Certificate fetches an interest of 8% and Sukanya Samridhhi scheme 8.5%, SBI is offering 6.8% for deposits above 1-year tenure and can’t possibly trim the rate further for fears depositors would shift. JSW chief Jindal said: “It was decided that the government is going to take action very soon to revive industry. We got positive feedback from the finance minister.” Piramal Enterprises chairman Ajay Piramal said that industry raised matters such as reluctance of banks to lend. “It is not that there was a lack of liquidity in the banks, but lending was not taking place. There is stress in the NBFC sector as well,” he told reporters after the meeting. The NBFC issue is impacting sectors like auto, home loan and MSME. “I am told that there will be action soon. So, we will wait for that,” he said.
The government has already said that while liquidity is no longer a concern, some NBFCs have been hit by solvency and governance issues. The RBI on Wednesday said it wouldn’t allow any systemically-important NBFC to collapse. The government last week said the National Housing Bank would provide refining worth additional Rs 10,000 crore for affordable housing.
Earlier this week, the finance secretary said norms would be finalised soon to enable public-sector banks to implement the Budget announcement under which the government will offer a one-time six-month partial guarantee of Rs 1 lakh crore to PSBs for purchasing consolidated high-rated pooled assets of financially-sound NBFCs. This will cover their first loss of up to 10%. The economic expansion already collapsed to a five-year low of 6.8% in FY19. It is forecast to only marginally improve in the current fiscal to around 7% (RBI on Wednesday pruned it to 6.9%), provided private investors return and consumption expenditure rebounds.
Source:financialexpress
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