Yesterday, Finance Minister Nirmala Sitharaman made the first of what would be a series of press conferences to unveil the plan of reviving the economy. Previously, PM Modi had announced that the total support to the economy would be around 20 lakh crore rupees or 10 percent of the GDP, which would include liquidity injection by RBI.
Yesterday’s press conference by Sitharaman was focused on the support measures for MSMEs, which are hit hardest due to 2 month long lockdown. The real estate sector, which is expected to feel the heat of economic slowdown and lockdown for the next few quarters, was also in focus of the government measures announced so far.
To support the MSMEs, Sitharaman announced collateral free loan worth 3 lakh crore rupees which is expected to benefit 45 lakh units. These loans are government backed and the principal amount needs to be repaid in four years with moratorium for the first year. Interest rate on these loans is capped, and the government would announce rate for these loans in next few days.
The government also broadened the definition of MSMEs in order to make that maximum number of units utilize the benefits and the reeling sector is revived.
Given the fact, MSMEs are the second largest employer after the agricultural sector, their revival is the most essential for the government because millions of people would have no source of income if the sector goes bust. Of the 5.98 lakh crore rupees package announced yesterday, MSMEs bagged the highest amount with more than 4 lakh crore rupees.
Apart from MSMEs, the other sectors in focus were power and construction. A Rs 90,000 crore liquidity injection plan was announced for the financially stressed power distribution companies. This plan will allow these entities to clear their dues towards power generation companies. As per the plan, the liquidity window for discoms was essential as its revenue has plummeted and they are in the midst of unprecedented cash flow problem accentuated by demand reduction during the current lockdown. The scheme will allow power sector financiers — PFC and REC to infuse liquidity of Rs 90,000 crore to discoms against receivables.
The minister stated that Union Ministry for Housing and Urban Affairs will issue advisory to states and union territories to declare the Covid-19 situation as a ‘force majeure’ under the Real Estate (Regulation and Development) Act.
With this move, the government has allowed suo-moto extension of the registration and completion date by six months for all registered project expiring on or after March 25, 2020 without individual applications.
The industry lobby bodies like CII were positive on the government’s measures and said that the Finance Minister has got the priority in right order. “The sectors covered in the initial phase are clearly the ones that required the highest policy attention at this juncture, including MSME, power, and construction and real estate. The impact of the package totalling Rs 20 lakh crore to be unveiled in the next few days would add to spending power and bring relief to millions of enterprises that employ huge numbers of workers. We expect the stimulus measure to impart stability and growth to the economy,” said Vikram Kirloskar, President, Confederation of Indian Industry (CII).
The government measures, combined with the opening of the economy for which order would probably come by May 17, would help to revive economy. It is going to be a tough year and if the country is able to keep the real growth rates in the positive territory, it would be a great achievement.