On 12th May 2020, in light of the Covid-19 global pandemic, the Indian Prime Minister Narendra Modi announced a major stimulus package for the Indian economy. On 13th May, the Finance Minister Nirmala Sitharaman held a press conference to outline the details of the package.
The economic package in question amounts to about Rs. 20 lakh crore or USD 265 billion. After Japan, this is the second-largest Covid-19 relief package in Asia. It is also equivalent to about 10 percent of the Indian economy.
All the major industries within the Indian economy are covered under the package, including MSMEs.
Relief For The MSMEs
The package outlines Rs. 3 lakh crore automatic loans that are collateral-free. These loans are for businesses that include MSMEs. It also offers an emergency credit line for MSMEs and businesses from NBFCs and banks.
This credit line is up to 20 percent of the complete outstanding credit as on 29th Feb 2020.
For MSMEs that are stressed and require equity support, the package offers subordinate debt to the tune of Rs. 20,000 crores. The package also allows for the creation of a “Fund of Funds” that will infuse Rs.50,000 crores worth of equity into MSMEs.
MSMEs will be redefined based upon their turnover size and investment limits. Up to Rs. 200 crores, government procurement will not allow for global tendering.
Within the next 45 days, the Central Public Sector and the Government of India will clear the dues of MSMEs.
Industry-Speak
The CRO and Co-Founder of CloudConnect Communications, Mr. Raman Singh, said that the announcement by the Finance Minister came as a bright ray of hope in these bleak times. The collateral-free loan provisions will deliver a much-needed boost to small businesses that form the very backbone of the Indian economy, he added.
Mr. Singh also said that the Rs. 50,000 crore infusion through the fund of funds for MSMEs will go a long way in bolstering the country’s start-up landscape. He commended the Prime Minister’s commitment towards an India that is self-reliant.
The CEO and Founder of Aiisma, Mr. Ankit Chaudhari, said that moves like extended tax timelines, lower TDS deductions and collateral-free loans will help with greater immediate liquidity at some ends. He observed that it remains to be seen if the reduction in TDS liability and the roll-out of the eligibility schemes for the loans lead to much-needed market liquidity.
CEO and co-founder of Staqu Mr. Atul Rai said that an automatic loan that was collateral-free was a commendable announcement by the government. The MSME industry that had been going through a period of turmoil will be strengthened by it.
Mr. Rai is hopeful that these steps will help to boost the market. He is also expecting it to facilitate positioning India as a leading manufacturer of goods and services.
CEO and founder of Haptik Mr. Akrit Vaish thinks that the economic relief package due to Covid-19 will be a welcome boost to the MSME sector that is stressed. For businesses that have been adversely affected, the MSME equity support will help.
Mr. Vaish also said that employers would be relieved and employees will enjoy a higher take-home pay, thanks to the EPF contribution reduction. Now that the salaried employee has more cash in hand, consumer spending will increase.
Mr. Vaish also observed that this stimulus would do much to improve the market sentiment and jump-start the economic wheels.
The CEO and co-founder of Khabri Mr. Pulkit Sharma feels that the government measures for MSMEs are great as far as the Indian startup ecosystem is concerned.
Clearly, India Inc. is not mincing its words when praising the new stimulus packages that have come into effect. What remains to be seen is the effectiveness of its implementation and adoption which, in turn, will pave the way for similar initiatives in the near future.
