The Confederation of Indian Industry (CII) is conducting a survey in Kerala to understand the short-term and long-term economic implications of Covid-19 on key sectors ranging from food processing, ayurveda, agriculture, tourism, MSME, healthcare, and finance. The State has the 12th largest number of MSMEs in India.

The survey is expected to come up with alternative revenue models for industry, says Thomas John Muthoot, Chairman, CII-Kerala. Organisations/government should use this as an opportunity to reflect on the ability to navigate a crisis and, going forward, consider actions to raise their agility and become more resilient in the future, he said.

Bad debts and defaults

Th CII feels there is need for a special package for nano enterprises and MSMEs, something similar to the Small Business Disaster Loan and the Paycheck Protection Programme announced in the US. The programme provides small businesses with funds to meet the ordinary and necessary operating expenses and pay up to eight weeks of payroll costs.

The next priority is to get cash to large businesses which face a cash drought even as bills fall due. Banks and bond markets are closed to many of them. Mass defaults would fuel unemployment and bad debts at banks make it harder for commercial activity to rebound. “The Reserve Bank has intervened with measures to provide liquidity to banks and three months’ moratorium for borrowers, but these may not be enough. Banks should lend liberally to corporates and subscribe to their bonds,” says Thomas John Muthoot.

Resources mobilisation

Many of the aforementioned interventions need resources for the State and Central governments and there is an urgent need to find novel ways to mobilise resources. Fortunately, history provides a template on how to do this and conduct corporate bailouts in times of acute stress. There are few proven models from the Great Depression to the 2008 Global meltdown.

“Using the Depression-era Reconstruction Finance Corporation (RFC) model, we should set up something similar to provide assistance to stricken sectors like MSMEs, hospitality and airlines to revive their businesses. Assistance can be in the form of quasi-equity or long-term loans, say with a 20-25 year tenure. The RFC has to be established as a quasi-independent Central or State agency of the World Bank. It can be overseen by a Board of Directors from the Reserve Bank, the World Bank, and the industry,” Thomas John Muthoot said.