For the last two weeks, I was writing to you through a series of articles on The COVID19 Impact on Indian Business, and in the concluding article, I would like to discuss Indian initiatives against COVID19. Some thoughts will need detailed discussions between all stakeholders by keeping in mind the broader macro-economic and fiscal parameters of the country and the global scenario.
I believe that all possible solutions for Business Revival will require to be continuously updated based on the unraveling situation. There is nothing cast in stone, there is no one size fits all, adaptability is the key, indecisiveness is not the cure, procrastination will do more harm than good, most importantly the leadership must have the courage and conviction to accept that some decisions taken may need to be changed to suit the new evidence and resultant changing circumstances.
The government may consider extending financial grants or soft loans to cover some very critical items such as employee costs of an entity for the lockdown period, EPF contributions for at least two quarters, 6 months’ fixed overheads based on Annual Accounts for 2019-20 or Income Tax Filings for FY 2018-19 and 3 months’ purchases based on the top 3 months’ of purchases per GST Returns for FY 2019-20.
The amount of this assistance may be linked to the Annual Net Revenue per GST Returns for fiscal 2019-20. These can be graded such that this assistance is 100% of the eligibility for businesses having Annual Net Revenue up to Rs. 50 crores and move to lower %age eligibility with Nil assistance for businesses having Annual Net Revenue exceeding Rs. 500 crores.
- The government may consider one year (FY 20-21) complete GST and IT waiver for all businesses that had Net Revenue / Income upto Rs. 50 crores in FY 19-20 per GST returns, it may be graded thereafter up to a turnover of Rs. 500 crores such that Income Tax is capped at 15%.
- Some simpler initiatives can be 50% reduction in all tariffs of facilities such as water, electricity, etc., waiver of property tax and professional tax for a period of 6 months to worst-hit businesses especially hotels and restaurants, the interest subvention of 5% on all bank finance for FY 20-21, reduced interest rates on pre-shipment finance for exporters for a predefined period after lockdown and a fund may be created to support Start-ups and provide loans at low-interest rate.
- Today’s situation is so very fluid that it is really very difficult to come out with a reasonably accurate estimate of the one-time requirement of such assistance.
- Today’s decisions will most likely haunt the Indian Economy and Banking System for years’ to come. So, a very careful and calibrated approach is required.
- One possible remedy could be, continuous monitoring of assisted entities’ cash flows through a digital platform to ensure proper end-use and devise an appropriate review mechanism for the next 3 quarters.
To conclude, it is indeed very difficult to design a win-win situation in this Black Swan moment. Humanitarian steps will need to be dovetailed with the revival of business, a very daunting task. The earlier it is possible to be done is better, will be the motto of this government.