Confederation of Indian Industry releases “A plan for economic recovery”

The Confederation of Indian Industry (CII) has recently released a paper titled “A plan for economic recovery”. Amid the COVID-19 pandemic, economies around the world are facing extreme damages which has been slated to be even worse than those caused by the the global financial crisis a decade back. Stating every crisis an opportunity, CII has come up with a short and medium term plan to provide India with an opportunity to reshape the industrial landscape.

About The Confederation of Indian Industry (CII):

Founded in 1895, the Confederation of Indian Industry (CII) is a non-government, not-for-profit, industry-led and industry-managed organization working towards creating and sustaining an environment favourable to the development of India and hence, plays an active role in India’s development process.

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About “A plan for economic recovery”:

The Confederation of Indian Industry (CII) has recently released a paper titled “A plan for economic recovery”. In this paper, CII has projected India’s GDP growth rates as well stated short term and medium term plans for sustained recovery of Indian economy.

GDP growth projections made in the paper:

CII has projected GDP growth rate of India after considering the impacts of COVID-19 across different sectors. CII has estimated GDP growth under three different scenarios:

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  • Optimistic Scenario: When the economic activities picks-up slowly post lockdown period and continues to full capacity shortly thereafter. As per this scenario, GDP is expected to register a growth of 1.5% in the best case.
  • Base Scenario: It is a situation in which pick-up in economic activity is constrained by restrictions on free movement of goods and people even in post lockdown period. As per this scenario, GDP is estimated to grow at just 0.6% on an annual basis.
  • Downside Risk Scenario: It is a situation when COVID-19 outbreak continues and spreads further, leading to prolonged restrictions in existing hotspots while ‘new’ hotspots get identified. As per this scenario, GDP is likely to fall by -0.9%.

On the basis of three scenarios discussed above, CII expects GDP growth to lie between -0.9% and 1.5% for the Fiscal Year 2021.

What is a Debenture? Credit Rating Agencies in India IMF releases “World Economic Outlook”

Short Term & Medium Term Recovery Plan:

CII has also mentioned short term & medium term recovery plans in its paper “A plan for economic recovery”. Some of the suggestions are as follows:

  • It includes the creation of a fund or special purpose vehicle (SPV) with corpus of Rs 1.5 lakh crore which will subscribe to NCDs/Bonds of Corporates rated A and above.
  • It also suggested a credit protection scheme for the Micro, Small and Medium Enterprises (MSMEs) in which 75-80% of the loan should be guaranteed by the Reserve Bank of India. It states that if the borrower defaults then RBI should buy the loan as well as repay the bank upto 75-80% of the loan.
  • It also suggested some structural reforms in order to reduce the cost of doing businesses.
  • It also stressed on the need of fiscal consolidation to maintain the financial stability in the medium term.

Therefore, in present situation Indian economy needs a combination of short-term spending and medium-term reforms for a sustained economic recovery.

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