The Associated Chambers of Commerce and Industry (Assocham) has urged the government to set up a Rs.1 trillion ‘revolving fund’ to assist infrastructure firms to weather the global meltdown.

‘Several expansion plans in steel, auto, fertilizer, refineries and oil and gas exploration sectors currently face severe capital shortages,’ said the industry body, adding that the proposed fund could help developers complete these projects with their internal accruals.

A revolving fund is a fund or account whose income remains available to finance its continuing operations without any fiscal year limitation.

In its mid-year economic review, the Assocham said the fall in corporate profitability has already affected the flow of savings into capital market.

‘The effect of this is compounded by global financial crunch that has led to withdrawal of $13 billion from foreign portfolio investment,’ the report said.

The chamber further welcomed the ‘political will’ the government demonstrated in parliament last week by tabling the insurance and other bills, expediting economic reforms.

According to the report, the area of concern is the manufacturing sector where the fall in demand and export orders has combined to bring down output growth to a negative level for the first time.

The mid-year review also expressed concern on the employment situation in the wake of the downturn.

‘Service economy already accounts for some 52% of the GDP (gross domestic product). It should not be allowed to flounder in the wake of global downturn and loss of domestic output,’ Assocham said.

Against this background, ‘reports that some sectors like public sector banks are planning to expand their hiring programs are welcome,’ it added.

‘At the same time, individual industrial units should be enabled to fine tune their staff requirements to changing demand patterns and rapidly changing technological compulsions. Otherwise, the increasing number of sick units would only defeat the objective of maintaining and expanding high levels of employment,’ the report said.

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