Hello, this article is regarding the simplification of economic stimulus provided recently to the Indian citizens and businesses. On 12th May 2020, Prime Minister Narendra Modi appeared on the national Television at 8 P.M to address the nation. India was already expecting an economic package to rejuvenate its halted economy.
In about 40 mins long address he tensed on self-reliant India and announced the economic stimulus of 20 lakh crores. The Rs 20 lakh crore package includes the already announced Rs 1.7 lakh crore package of free foodgrains to poor and cash to poor women and the elderly and the RBI measure of 6.5 lakh crore. The trailer was appreciated. On 13 May 20, F.M. Nirmala Sitharaman kick-started the part-1 of the supposed blockbuster. The name offered to this scheme is 'Atma Nirbhar Bharat Abhiyan' which is supported by 5 pillars- Economy, Infrastructure, System, Vibrant Demography, and Demand.
Finance ministry came up with the 15 different measures- 6 of them about MSMEs, 2 relate to employee provident fund, 2 to NBFCS, HFCs and MFIs, 1 to discoms, 1 contractor, 1 real estate, among others.
Micro, Small, and Medium Enterprises(MSMEs) -
• To provide a major thrust GOI to provide a total sum of 3 lakh crore of loan against 0 securities and capital i.e collateral-free which will inject capital and help to revive the business.
• Emergency credit made available to MSMEs/Businesses up to 20% of their liabilities as on 29/02/2020. i) Borrowers up to 25 crores of outstanding and 100 crores of turnover eligible. ii) Loan duration of 4 years and borrower is not obligated to pay principal amount till 12 months. iii) They will be saved from fluctuating high-interest rates in the market by using a cap, thus ensured low risk.
• Government estimates that about 45 lakh MSMEs to be benefitted under this scheme.
•For distressed MSMEs and NPA government to provide 20,000 crores of sub-ordinate loan to clear other debts.
• To tackle the equity shortage Government to set up a fund of funds of 10000 crores Rs. (Please read about Fund of Funds).
•Various MSMEs were restricted to growth by the fear of missing out from the benefits provided by the government, which is now managed by changing the definition of MSMEs.
• Investment limits are revised upwards and turnover criteria are also introduced. The biggest step was taken by the government to boost the Make In India and Atma-Nirbhar Bharat by banning global players in bidding government procurement tenders up to 200 crores Rs.
Whats for the employee? •The government plans to continue to provide employer provident fund(EPF) for salary another three months thus injecting 2500 crore Rs in the market.
• Also decides to lower down the provident fund rates from existing 12% to 10% to increase take-home salary. Hurray!!!
• Whereas CPSE and PSUs to continue to contribute 12%.
( 2 and 3 points applicable to those who don't lie in 24% EPF scheme.)
The lenders (NBFCs, HFCs, MFIs)
• Government plans to provide 30000 crores as a special liquidity scheme for NBFCs, HFCs, and MFIs.
• For low credit rating NBFCs, MFIs, and HFCs government promises to bear 20 % of loss by continuing partial credit guarantee scheme, estimated to provide liquidity of 45000 crore Rs.
For DISCOMs( Power distribution cos)-
• Revenues in this sector have plummeted as all the operations have stopped due to nation-wide lockdown.
• DISCOMs are having payables of Rs. 94000 crores due to unprecedented cash flow.
•Power Finance Corporation / Rural Electrification Corporation to provide liquidity of Rs. 90000 crores for the exclusive purpose of clearing liabilities to power generating companies.
• DISCOMs are set to get a rebate from the Gencos.
Contractors -
• Government decides to provide an extension of 6 months without cost to the contractor.
• Government agencies to ease the cash flow in construction works.
Direct Tax Measures-
•To put more money in our pocket i.e disposable money a cut in Tax Deduction at Source & Tax Collection at Source for specific receipts by 25% of the existing rate.
• Payment of contract, interest, rent, professional fees, commission, dividend, and brokerage, etc shall be eligible for this reduced rate of TDS.
• Due date of all I-T returns pushed to July to November.
The government got positive feedback from the market as India saw a jump of about 2.03 percent rise in Sensex and Nifty 50.
So India has started the engine of its economy. Only time will tell that will we be able to move to top gears soon.
All eyes set on the next two days address from the Finance ministry.
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