Assocham Seeks Rs.1 Trillion Revolving Fund for Infrastructure Firms
The Associated Chambers of Commerce and Industry (Assocham) has appealed to the government to establish a Rs.1 trillion revolving fund to support infrastructure firms navigate the ongoing global economic downturn.
Capital Shortages Hinder Expansion Plans
According to Assocham, multiple expansion projects in key sectors such as steel, auto, fertilizer, refineries, and oil and gas exploration are presently facing severe capital shortages. The proposed revolving fund would enable developers to complete these projects using their internal accruals.
Understanding Revolving Funds
A revolving fund, or account, is designed to retain income for financing continuous operations without fiscal year limitations, offering a stable financial foundation for infrastructure projects.
Mid-Year Economic Review Highlights Concerns
Assocham's mid-year economic review underscored the decline in corporate profitability, which has adversely impacted the flow of savings into the capital market. This issue is compounded by the global financial crunch, leading to a significant withdrawal of $13 billion from foreign portfolio investment.
Welcoming Government's Economic Reforms
The industry body commended the government's demonstration of 'political will' in parliament, exemplified by the tabling of insurance and other bills, which are expected to expedite economic reforms.
Manufacturing Sector and Employment Situation Under Spotlight
The review expressed concern regarding the manufacturing sector, where decreased demand and export orders have resulted in negative output growth for the first time. Additionally, the employment situation has become a pressing issue in the face of the economic downturn.
Service Economy and Public Sector Banks' Hiring Plans
Assocham noted that the service economy, which accounts for approximately 52% of the GDP, must not be allowed to falter. Reports of public sector banks planning to expand their hiring programs were welcomed, while emphasizing the need for individual industrial units to adapt their staffing requirements to changing demand patterns and technological advancements.