The first tranche of the Rs 20 lakh crore stimulus that Prime Minister Narendra Modi announced on Tuesday was unveiled by Finance Minister Nirmala Sitharamn today with a focus on micro, small and medium enterprises.
The first tranche of the Rs 20 lakh crore stimulus that Prime Minister Narendra Modi announced on Tuesday was unveiled by Finance Minister Nirmala Sitharamn today with a focus on micro, small and medium enterprises. The measures announced by the Finance Minister included a Rs 3 lakh crore collateral-free loan package for MSMEs that have turnover of Rs 100 crore, along with this the government has also tweaked the definition of MSMEs to help them enjoy the benefits coming their way. Industry leaders and market participants have been reacting to the set of announcements, while terming some moves as path-breaking they are also waiting with bated breath on how some will be implemented. Here are what some reactions that are coming in:
Amitabh Kant, CEO, Niti Aayog – The package announced is very comprehensive when it comes to MSMEs. The change in definition is a good move and it took a lot of courage to make that change. Today’s package will get over the lack of adequate liquidity in HFCs and NBFCs and this will get the economy going as far as MSMEs are concerned, they account for a lot when it comes to job creation. Also, banks that were only picking up AAA rated paper now with what the government has done with the Rs 45,000 crore special liquid scheme will get this debt paper moving. The cycle of money will also flow in the economy as far as the DISCOMs are concerned so with the Rs 90,000 crore, a huge sum of money will move in the economy. (on CNBC TV18)
Rajiv Kumar, Niti Aayog VC – The Finance Ministry is trying to tell that a lot of loans have been given out but they have just not been taken away right now owing to the lockdown. Banks and NBFCs are listed and they can not just hand out money which is why the Rs 3 lakh crore collateral-free loans are necessary. (on ET Now)
N Venkatraman, CEO, Deloitte – We have only addressed a part today. The whole issue of supply chain came up because of the stress between China and the US. When you talk about going local then we look at imports coming to india. There is no reason to believe that India can not make daily needs electronic items or other daily needs. Auto industry has proved it is possible. We can export seafood as well given the vast coast-line we have. We can agree that we will continue to trade with China but there will be a more balanced trade. (on CNBC TV18)
Anil Bhardwaj, Secretary General Federation of Indian Micro and Small & Medium Enterprises – The moot question is how quick these Rs 3 lakh crore worth loans can be sanctioned and disbursed. Subordinate debt is also very important, large part of the MSMEs will be facing problems and this will help them turn the story around. For the definition of MSMEs the government has take the middle path and taken the turnover plus investment guide in deciding the definition of MSMEs (on CNBC TV18)
Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote – One of the most astute stimulus package series-1 has been announced by our Finance Minister which is not only fiscally responsible but also specifically aims to connect the weaker dots in the economy. This is to quicken India’s revival as soon as the lockdown eases. Although late, the Government indeed came out with a superior proposition as compared to developed countries when seen in terms of specific targeting and effectiveness thereof.
Barclays India – Today’s announcement focused on MSMEs, with six measures laid out. First, the government will provide MSMEs with collateral-free loan facility of INR3trn for four years, fully guaranteed by the government and to be given by 31 October 2020. Second, stressed MSMEs will be given Rs 200bn for support. Third, a fund of funds will be used to provide growth potential will be given Rs 500bn of equity funding. Fourth, the definition of MSMEs will be revised to allow MSMEs to benefit from their existing benefits as they grow, by increasing the turnover/capital investment rules. Fifth, for government procurement, orders worth Rs 2bn will be retained only for local companies. Sixth, the government will clear payments of MSMEs in the next 45 days. The impact on the fiscal deficit will likely be smaller than the headline figures announced by the government, and by our calculations, today’s measures will take up Rs 555bn of total fiscal spending on balance sheet, which indicates that the government can still spend Rs 1.35trn of GDP on balance sheet in further measures. We believe the government may end up with a fiscal deficit of close to 6% GDP during FY20-21.