India Inc on Wednesday said initiatives unveiled by the Finance Minister targeting key sectors of MSME, discoms and real estate as part of the 'Stimulus Package 2.0' will enable them to mitigate the impact of the coronavirus crisis.
Industry bodies said the measures will infuse liquidity in the market and inject a fresh lease of life in distressed micro, small and medium enterprises (MSMEs).
Finance Minister Nirmala Sitharaman announced Rs 3 trillion of collateral-free loans for small businesses, cut the tax rate for non-salary payments and provided liquidity to non-banking companies to help them tide over the disruptions caused by the lockdown.
Unveiling the first set of measures under the Rs 20 trillion Covid-19 economic stimulus package announced by Prime Minister Narendra Modi, she said Rs 90,000 crore liquidity infusion will be made in electricity distribution companies to help them fight the current financial stress.
For all companies, the statutory obligation to pay 12 per cent of basic salary as employer's share to employee provident fund (EPF) contribution has been reduced to 10 per cent to boost their liquidity.
Also, dates for filing income tax returns and other assessments have been extended. CII Director General Chandrajit Banerjee said the most important announcement with long-term implications is the quantum jump in definition of MSME, which had not been changed since the MSME Development Act of 2006 and was long awaited.
The definition of MSMEs has been changed from a pure investment-based one to that provides for higher investments and turnover for companies to remain classified as small businesses, and avail financial and other incentives.
Along with the decision not to have global tenders for government procurement up to Rs 200 crore, the redefinition will assist the MSME sector to grow and emerge as a vibrant and dynamic sector, contributing to self-reliance and employment in a big way, Banerjee said.
Assocham Secretary General Deepak Sood said the measures would provide immediate and the much-needed relief to MSMEs, micro finance institutions, housing finance companies, stressed real estate and construction sectors.
He said assuring 100 per cent government guarantee on Rs 3 trillion collateral-free loans to the MSMEs for a four-year term and one-year moratorium is a major step towards reviving the MSME sector which creates 11 crore jobs and accounts for 30 per cent of the country's GDP.
FICCI President Sangita Reddy said the industry welcomes the 'Stimulus Package 2.0' and looks forward to more such measures. "With today's comprehensive set of announcements, the stage is now set to rebuild the Indian industry and economy.
Listening to the Finance Minister and the series of measures spelt out gave us the confidence that our government is ready and will lead from the front in taking India out of the Covid-19 storm and emerge bigger and stronger," Reddy said.
While the infusion of liquidity to the tune of Rs 90,000 crore in discoms against their receivables by PFC and REC will help them discharge their payments to generation companies, a longer-term approach to make the sector sustainable is required, she added.
US-India Business Council President Nisha Biswal said the moves provide critical support to non-bank financial institutions and MSMEs, who form the backbone of the economy, as well as all businesses and consumers via tax relief.
"We are optimistic that these policies will help get the economy moving again and enable industry to put millions of Indians back to work safely and minimize the spread of the coronavirus," Biswal said.
The finance minister announced a Rs 30,000 crore special liquidity scheme for non-banking financial institutions (NBFCs), housing finance firms (HFCs) and microfinance institutions (MFIs) with a view to provide credit support to them and create confidence in the market.
Further, a Rs 45,000 crore partial credit guarantee scheme 2.0 was also announced for NBFCs, HFCs, and MFIs with low credit rating to help them extend a loan to individuals and MSMEs.
"It is a step in the right direction to spur growth as we look towards making India self-reliant with focus on land, labour, liquidity and laws," said Rashmi Saluja, Executive Chairperson, Religare Enterprises.
Kunal Bahl, co-founder and CEO of Snapdeal, tweeted, "MSMEs are India's backbone. Today's measures by FM Nirmala Sitharaman will help them get back on their feet.
Additional collateral & guarantee free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds are strong enablers." "Liquidity & credit guarantees for banks & NBFCs will help remove hesitation in lending. Friction-free implementation of these measures can slowly convert adversity to advantage," he said.
Kunal Arora, Joint Partner, and Pooja Vijayvargiya, Principal Associate, Lakshmikumaran & Sridharan Attorneys said with core focus on self-reliance as propagated by the Prime Minister, the finance minister announced a slew of measures for infusing liquidity into the hands of corporates and individuals and for easing compliances to spur the stalled business activities in the country.