Finance Minister Nirmala Sitharaman on Wednesday briefed the media on the Rs 20 lakh crore-stimulus package announced by Prime Minister Narendra Modi on Tuesday to tide over the economic fallout of the coronavirus pandemic.
The finance minister said six major steps are being taken to help micro, small and medium enterprises. She said the first step was the introduction of Rs 3 lakh crore collateral-free automatic loans for businesses. These loans have to be returned within four years. For the first year, the principal will not have to be repaid.
For stressed MSMEs, Rs 20,000 crore will be provided through a subordinate debt-based scheme, she added. As many as 2 lakh MSMEs will be helped by this, she claimed. The government will create a “fund of funds” to infuse about 50,000 crore for MSMEs which are viable but need hand-holding due to the coronavirus situation.
“Beginning today, for the next few days, I shall be coming out with the entire details [of the package] before you,” Sitharaman said. “We shall not forget that we do have a responsibility towards the poor, needy, the migrants workers, divyang [disabled] and the aged of the country.” The finance minister said that Rs 52,000 crore have been transferred into the accounts of 41 crore Jan Dhan Yojana holders through Direct Benefit Transfer.
The finance minister said the government has changed the definition of MSMEs to their advantage. She said MSMEs now need not fear growing in size. “Investment limit which defined an MSME is being defined upwards,” she said. “Additional criteria based on turnover is being brought in. The distinction which prevailed between manufacturing and service MSMEs are being removed.” She said investment can be up to Rs 1 crore and turnover Rs 5 crore for a micro enterprise.
The fifth measure is that global tenders for MSMEs will be disallowed in government for tenders of up to Rs 200 crore. This will help MSMEs participate in government purchases, Sitharaman said. Sitharaman said that all receivables of the MSMEs will be cleared within 45 days.
Changes to provident fund schemes
With regard to Employees Provident Fund, Sitharaman said that a liquidity relief would be given to all EPF establishments. “We extend the support which government of India gave [in March] for another three months,” she said. “We had given it for March, April and May. Nearly 3.6 lakh establishments benefited from this. In June, July and August, the EPF contribution will be provided by the government of India. Therefore, we shall be infusing Rs 2,500 crore liquidity, and 72.22 lakh employees will benefit.”
She said that in order to provide more take-home salaries, the statutory Provident Fund contribution is being reduced from 12% to 10%. However, for Central Public Sector Enterprises and Public Sector Units, the contribution will remain 12%.
Sitharaman announced a partial credit-guarantee scheme for Non-Banking Financial Corporations of Rs 45,000 crore. The first 20% loss in these corporation will be borne by the government, she said. The previous scheme was worth Rs 30,000 crore.
Sitharaman said discoms are in major trouble. She announced a liquidity infusion of Rs 90,000 crore into the discoms, against their receivables. The states will issue guarantees for this infusion.
The Ministry of Urban Development will issue an advisory to the states so that the regulatory authorities can treat the Covid-19 outbreak as an Act of God, and therefore be flexible about existing contracts for projects. The registration and completion dates for these projects can be extended for six months if registration was done after March 25.
The finance minister announced a 25% deduction in tax deducted at source, or TDS, for non-salaried specified payments and an equal deduction in tax collected at source, or TCS, for the specified receipts. This will put more money into the hands of the taxpayer. The measure will come into force on Thursday and last till March 31, 2021.
‘Self-reliant does not mean isolationist’
Sitharaman said that making a self-reliant India does not mean making it isolationist. She said that India will continue to help other countries. “We have the capability and enterprise, we’ll continue contributing to the globe,” she said. Sitharaman outlined the five pillars of self-reliant India – economy, infrastructure, system, demography and demand.
“Focus will be on land, labour, capital and enterprise,” she said.
The finance minister said that Modi had laid out a vision after wide consultations with society. Modi exhorted Indians to become vocal for our local products, she added.
In his address to the nation on Tuesday, Modi had said that the economic package, advanced for the Aatmanirbhar Bharat Abhiyan, or self-reliant India scheme, will make India self-sufficient. The prime minister added that the package was meant for micro, small and medium enterprises, farmers, labourers and businesses. The package would also include the government’s recent announcements to support some key sectors as well as recent measures rolled out by the Reserve Bank of India.
After the prime minister’s announcement, Sitharaman said that the package would serve as a reform stimulus. “This shall not be just a financial package, but a reform stimulus, a mindset overhaul, and a thrust in governance,” she tweeted.
The coronavirus pandemic and weeks of lockdown have severely damaged India’s economy. In March, the government had announced a stimulus package worth Rs 1.70 lakh crore for the poor and vulnerable sections of the society.
In Tuesday’s address, the prime minister had announced that the country would enter the fourth phase of lockdown from May 18. He added that the fourth phase would be very different from the first three and the details will be shared with the people soon.
The number of coronavirus cases in India rose to 74,281 on Wednesday morning and the toll reached 2,415, according to data from the Union health ministry.