India needs stimulus plan or it risks crippling small businesses: Industry bodies

Many economists have sharply lowered their India growth forecasts for the fiscal year through March and the next beginning April due to the outbreak, with some flagging further cuts should the situation deteriorate.

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Former Reserve Bank of India Governor Bimal Jalan said the bank should cut rates, and that the government should act without worrying about fiscal deficit targets.
MUMBAI: India's small and mid-sized enterprises (SMEs) will struggle for survival if the government does not follow international counterparts in offering financial support to those acutely impacted by the coronavirus outbreak, industry bodies said.

The government has acted to slow the spread of the virus which has infected 482 Indians and led to nine deaths, such as by advising people to stay home. Yet India is one of few nations to announce neither budgetary support nor interest rate cuts.

Labour-intensive SMES, which employ over a 100 million of India's urban population, "need immediate fiscal relief and credit flow to keep their work force and essential plant and machinery running," said Ravi Sehgal, head of the Engineering Export Promotion Council of India - a trade body with 13,000 member firms of which 60% are SMEs, making it one of India's biggest SME voices.


The Ministry of Finance did not respond to a Reuters request for comment.

Many economists have sharply lowered their India growth forecasts for the fiscal year through March and the next beginning April due to the outbreak, with some flagging further cuts should the situation deteriorate.

The central bank has been intervening to ensure both rupee and U.S. dollar liquidity and to manage bond yields, but some market participants have argued this - plus a widely expected interest rate cut early next month - may not be enough.
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Former Reserve Bank of India Governor Bimal Jalan told Reuters the bank should cut rates, and that the government should act without worrying about fiscal deficit targets.

Regulators also need to address short-term liabilities and the refinancing capabilities of companies, said portfolio manager Venkat Pasupuleti at Dalton Investments.
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