Thursday, May 14, 2020

Finance Minister announces major stimulus package for MSMEs


New Delhi, May 13: Union Finance Minister Nirmala Sitharaman on Wednesday announced Rs.3 lakh crore collateral free loan scheme for businesses, especially micro, small and medium enterprises (MSMEs), as part of a Rs.20-lakh-crore economic stimulus package to deal with the COVID-19 pandemic.
For salaried workers and taxpayers, some relief was provided in the form of an extended deadline for income tax returns for financial year 2019-20, with the due date now pushed to November 30, 2020. The rates of tax deduction at source (TDS) and tax collection at source (TCS) have been cut by 25% for the next year, while statutory provident fund (PF) payments have been reduced from 12% to 10% for both employers and employees for the next three months.
NBFCs get attention
Apart from MSMEs, other stressed business sectors which got attention were non-banking finance companies (NBFCs), power distribution companies, contractors and the real estate industry.
This is the first tranche of the Atmanirbhar Bharat Abhiyan announced by Prime Minister Narendra Modi on Tuesday as a Rs.20 lakh crore economic package. That package includes the ongoing Pradhan Mantri Garib Kalyan Yojana, meant to support the poorest and most vulnerable communities during the pandemic, as well as several measures taken by the Reserve Bank of India to improve liquidity. More tranches are expected in the next few days.
Ms. Sitharaman side-stepped queries on the actual cash outgo for the government, as well as how the Centre intends to raise the needed funds.
Ernst and Young's chief policy advisor D.K. Srivastava estimated that the measures announced on Wednesday amounted to Rs.5.94 lakh crore, which include both liquidity financing measures and credit guarantees, although the direct fiscal cost to the government in the current financial year may only be Rs.16,500 crore.
MSMEs will get the bulk of the funding. The Rs.3 lakh crore emergency credit line will ensure that 45 lakh units will have access to working capital to resume business activity and safeguard jobs, Ms. Sitharaman said. For two lakh MSMEs which are stressed or considered non-performing assets, the Centre will facilitate provision of Rs.20,000 crore as subordinate debt. A Rs.50,000 crore equity infusion is also planned, through an MSME fund of funds with a corpus of Rs.10,000 crore.
The definition of an MSME is being expanded to allow for higher investment limits and the introduction of turnover-based criteria. In a bid to fulfill the Prime Minister's vision of a self-reliant or "atmanirbhar" India, global tenders will not be allowed for government procurement up to Rs.200 crore.

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