The Economy Boost Plan of the Government Focuses on Reviving MSMEs

The Economy Boost Plan of the Government Focuses on Reviving MSMEs

Finance Minister Nirmala Sitharaman has come out with several measures to boost businesses, and help labourers through financial support easing under the stimulus package Self-Reliant India Movement of INR 20 lakh crores which was announced by Prime Minister Narendra Modi.

The FM attempted to decrease the regulatory burden on companies, to give a new definition to MSMEs. In terms of takeaways, the biggest were for the MSME sector which is considered to be the backbone of economic activity.

She emphasized that additional criteria such as turnover have been considered for defining MSMEs. In terms of fiscal measures, the minister announced that Rs 3 lakh crore "collateral-free automatic loans" for businesses, including MSMEs, will be provided to meet operational liabilities built up, buy raw material and restart business.

She announced another scheme worth Rs 20,000 crore for "subordinate debt for stressed MSMEs". A Rs 50,000 crore ‘Fund of Funds' for MEMEs, which face severe shortage of equity, was also announced.

The Centre has also decided not to go in for global bidding for government procurement for tenders up to Rs 200 crore, thereby, promoting the participation of MSMEs, she said. Furthermore, e-market linkage for MSMEs will be provided and the CPSEs will pay all receivables to MSMEs within 45 days.

Besides MSMEs, a Rs 30,000 crore special liquidity scheme for non-banking finance companies (NBFCs), housing finance companies (HFCs) and micro-finance institutions (MFIs) was also announced.

The securities under the scheme will be fully guaranteed by the Central government. Further, the FM has also announced Rs 45,000 crore partial credit guarantee scheme for NBFCs. Additionally, a Rs 90,000 crore liquidity injection plan was announced for the financially stressed power distribution companies. Finally to provide more money into the taxpayers' hands, Centre decided to reduce the TDS (tax deduction at source) rates for non-salaried specified payments made to residents, and the TCS (tax collection at source) rates by 25 per cent for the specified receipts.

Under this measure, first 20 per cent loss will be borne by the Centre, and even unrated papers will be eligible for investment, enabling NBFCs to reach out even to MSMEs in far-flung areas. Sitharaman also announced a six month extension of contracts for contractors by all central agencies and departments including railways, the Central Public Works Department, and Ministry of Road Transport & Highways.

Loans will be extended against state guarantees for exclusive purpose of discharging liabilities of discoms to gencos (power generation companies). The minister stated that the Union Ministry for Housing and Urban Affairs will issue advisory to states and Union Territories to declare the Covid-19 situation as a 'force majeure' under the Real Estate (Regulation and Development) Act.