[ad_1]
NEW DELHI :
Finance Minister Nirmala Sitharaman on Wednesday offered struggling small businesses, the country’s top job creator, a bailout package that includes credit guarantees, capital support and a better chance of winning government contracts as part of ₹20 trillion package to revive the economy.
Sitharaman sought to address the problems faced by micro, small and medium-sized enterprises (MSMEs), which have been battered by the loss of business, the flight of workers and a severe liquidity crisis, with a package that addresses their problems. The definition of MSMEs will also be expanded to remove the perverse incentive for these companies to stay small with an eye toward continuing to enjoy the benefits.
According to official information, the 63 million MSMEs in India represented 29% of the country’s gross domestic production in fiscal year 2017. They represent around 45% of manufacturing production; More than 40% of exports and employ about 111 million people. Helping them restart is key to tackling the pain of job losses across the country and restoring demand for goods and services amid fears of a downturn in the economy. Wednesday’s announcement precedes new guidelines for reopening the economy starting Monday based on center-state discussions.
“Essentially, this is to stimulate growth and build a very self-sufficient India,” Sitharaman said, explaining the 15 measures announced Wednesday, of which six were for MSMEs. The others are intended to give more cash into the hands of individuals and companies, and belong to provident funds, non-banks, mortgage and micro lenders, energy distributors, contractors, real estate, and taxes.
MSMEs generally have little guarantee to offer to obtain bank credit. For small businesses that are not in default with an outstanding debt of up to ₹Rs 25 million and sales of up to ₹Rs 100 million, Sitharaman offered an additional 20% working capital financing. “Units will not have to provide any warranty or guarantee of their own. The amount will be 100% guaranteed by the Government of India, providing total liquidity of ₹3 trillion to more than 4.5 million MSMEs “, said the minister.
“This will be available until October 31,” said Sitharaman.
A provision is also offered for loans to stressed or defaulting MSMEs promoters of up to 15% of their participation in the unit so that promoters can infuse capital into these companies and get them out of trouble. Said credit will be limited to a maximum of ₹75 lakh. Capital financing support will also be offered to MSMEs with growth potential through the creation of a government. ₹Rs 10 billion fund, which will raise more funds to finance the capital infusion of approximately ₹Rs 50 billion in small businesses.
Liquidity support for non-bank lenders is also expected to indirectly benefit small businesses. Sitharaman announced a ₹Rs 30 billion special liquidity scheme for non-bank financial companies, housing finance companies (HFCs) and microfinance institutions (MFIs). Under the scheme, banks will be able to invest, through primary or secondary market transactions, in investment grade debt papers issued by NBFC, HFC and MFI. These will be fully guaranteed by the government.
The minister also announced that the definition of MSMEs will be adjusted to include a higher investment limit and an additional rule based on income. It will replace the current one based on a self-declared investment in plant and machinery. The new definition is intended to encourage ease of doing business and persuade them to be more aggressive in their growth. For example, in the case of manufacturing and service microenterprises, the investment limit will increase to ₹1 crore and income limit of up to ₹Rs 5 million. Until now, for manufacturing microenterprises, the investment limit was ₹25 lakh and ₹10 lakh for the service sector. The new definition will not distinguish between the manufacturing and service sectors.
“Some MSMEs felt that if they grow (according to the current definition), they will lose the benefit (that is granted to them). That is the reason for a change, “said Sitharaman.
Industry representatives welcomed the announcements. “The six measures announced by the MSMEs minister are very well targeted and meet the sector’s immediate and long-term requirements,” said Chandrajit Banerjee, director general of the industry lobby, Confederation of Indian Industry.
.
[ad_2]
