Gadkari on Monday said the recent steps announced by the government to boost liquidity and credit flows would also bolster “the purchasing power of the people via employment creation.
Minister for MSMEs and road transport and highways Nitin Gadkari on Monday said the recent steps announced by the government to boost liquidity and credit flows would also bolster “the purchasing power of the people via employment creation and help accelerate the wheels of the economy”. The minister’s comments came at a time when there is a widespread notion that the economic stimulus package unveiled by the government is skewed towards supply-side steps, while measures to augment people’s incomes via tax cuts or transfers of money would have been more opportune.
Given the ambitious target to award national highway projects worth Rs 15 lakh crore over the next couple of years, the minister said renewed attempts were being made to raise money from abroad to execute the massive projects. “We have decided to tap more FDI (for highway construction). Also, foreign pension funds and insurance funds are being approached, apart from multilateral bodies like ADB, World Bank and others,” the minister said.
Speaking at an e-Adda, on online interaction hosted by The Indian Express, Gadkari said that he has recently asked a former senior LIC official to draw up a specific road map on accessing foreign insurance funds. “The NHAI is AAA-rated, it collected Rs 28,000 crore as toll receipts in FY20 and would likely have annual toll revenues to the tune of Rs 1 lakh crore in five years,” he said.
Stating that infrastructure works halted due to the lockdown needed to be commenced immediately, the minister said: “We need maximum public private investment and foreign investment in infrastructure – roads, railway, aviation and even power sector. There are the big projects, we need to finance them. And by increasing liquidity into the market, we will create more employment potential”. “My view is that when you pump money into the economy, it is going to create demand. If 45 lakh MSMEs will get additional 20% credit (Rs 3 lakh crore collateral-free credit, jobs are indeed going to be created.”
The minister added that the facility offered in the stimulus package for stressed MSME accounts was going to trigger restructuring of assets. “Already we have restructured six lakh MSMEs till March 2020. We have decided to extend the date to December 31. So, by this way our expectation is that 25 lakh MSME accounts will be restructured.”
The minister reiterated that one of the problems faced by MSMEs was that they were not getting their payments in time – not just from the Central government and ministries or PSEs, but from states and their agencies, departments and from the private sector also. “Now, we have taken a decision that their payments (from the Central government and its agencies) would be made within 45 days.”
As part of the economic stimulus package, the government said recently it would offer full guarantee to banks to provide Rs 3 lakh crore as automatic collateral-free loans to micro, small and medium enterprises (MSMEs) whose accounts are still standard. The idea is to bring cash-starved small businesses back from the brink of collapse in the wake of the Covid-19 outbreak. The government hopes that as many as 45 lakh units could resume business activity and safeguard jobs, thanks to the succour.
Additionally, the Centre will also facilitate an equity infusion of Rs 50,000 crore into these businesses that are viable and need some handholding, by leveraging a fund of funds with a corpus of Rs 10,000 crore. Similarly, the government will provide a separate scheme for stressed MSMEs, which will benefit 2 lakh of them. It will provide Rs 4,000 crore as its share to set up a credit guarantee trust, which will then give its guarantee to the banks. A total subordinated debt of Rs 20,000 could be extend under this to such stressed businesses.
While these measures will help ease the liquidity woes of MSMEs, some industry executives say the absence of any fiscal support to tide over the immediate, nagging issues of payment of wages and interest on existing loans comes as a disappointment.