Coronavirus: FM announces Rs 3 lakh crore collateral-free loans for MSMEs, other measures to bring relief
Prime Minister Narendra Modi announced 'lockdown 4.0' yesterday as well as a combined economic stimulus package amounting to around Rs 20 lakh crore.
He emphasised how policies will be introduced in the coming months to spur growth and building a 'self-reliant' or 'aatmanirbhar' India on the five pillars of economy, infrastructure, technology-driven systems, demography, and demand.
Today, Finance Minister Nirmala Sithraman rolled out a slew of initiatives for micro, small and medium enterprises (MSMEs). She said the policies have been prepared after "wide consultation", and added that
inputs obtained from the industry were given "due consideration."
She said that the measures are based on land, labour, liquidity, and law, which will further focus on the ease of doing business and compliance of law and order.
Relief for MSMEs
MSMEs in India number up to 70 million and contribute around 30 percent to the nation's Gross Domestic Product (GDP). These enterprises are among the worst hit during the coronavirus pandemic. Sitharaman said that the GoI has come up with 15 different measures, out of which six are for MSMEs.
This includes providing collateral-free automatic loans worth Rs 3 lakh crore for businesses. Those companies that have an outstanding loan of Rs 25 crore and a turnover of Rs 100 crore are eligible for it. In addition, the tenure of these loans is going to be four years with a moratorium of 12 months on principle repayment.
The Finance Minister also announced that a provision of Rs 20,000 crore will be given as surbordinate debt to stressed MSMEs or business which are non-performing assets (NPAs).
To tackle the issue equity among business, FM announced an equity infusion of Rs 50,000 crore through a Fund of Funds (FoF) with a corpus of Rs 10,000 crore. This move will help MSMEs looking at getting listed on stock market.
New Definition of MSMEs
The other important announcement made was with respect to the definition of MSMEs. Sitharaman emphasised that fear of outgrowing the threshold set by the government to exhaust benefits has hindered the growth of the industry.
The new definition announced today will ensure that MSMEs can exhaust benefits without the fear of outgrowing. In addition, differentiation between manufacturing and services sector will be removed and one criteria for all will be established.
According to the new criteria, manufacturing and services company with a minimum investment and turnover amount of Rs 1 crore and Rs 5 crore respectively will come under micro enterprises. A similar criteria was announced for small and medium enterprises as well.
Indian MSMEs often face unfair competition from foreign players. To combat this, global tenders will be disallowed in government procurement tenders upto Rs 200 crores.
In a major boost to the companies facing cash crunch and unable to meet working capital needs, FM announced that MSMEs will get receivables from the government and the Central Public Social Enterprises (CPSEs).
Talking about the post COVID-19 era where social distance will become the norm, Sitharaman said that the government is working on e-market linkages for MSMEs which will act as substitutes for trade fairs and exhibitions.
Nitin Gadkari's response
Union Minister for MSMEs Nitin Gadkari had earlier hailed the "historic" the mega financial package announced by Prime Minister Narendra Modi to revive the Indian economy crippled by the COVID-19 crisis.
Gadkari further said the PM has sent out a message that the COVID-19 crisis should be considered as a blessing in disguise and "we should stand confidently and positively to take the nation forward on the path of development".
"The support given to MSME and Gram Udyog (by the government) has provided relief to about 11 crore people," the BJP leader added.
(Disclaimer: Additional inputs have been included from PTI)