Unveiling the first tranche of a massive stimulus package pledged by the Modi government to rescue the Indian economy from the devastating fallout of the Coronavirus pandemic, Finance Minister Nirmala Sitharaman on Wednesday announced a Rs 3 lakh crore collateral-free automatic loan schemes for Micro, Small and Medium Enterprises along with five other major boosters aimed to revive the sector most hit with economic woes.
Nirmala Sitharaman said that the intent to pursue the 'Atmanirbhar Bharat Abhiyan' is to spurt economic growth and to build a self-reliant India. She held that the policy is not meant to make India look inwards and adopt any isolationist stand, but to further develop its standing in global trade and commerce.
"Five pillars of 'Atmanirbhar Bharat are economy, infrastructure, system, demography and demand," Nirmala Sitharaman said. She said that in the following days, the government will announce a host of measures part of this stimulus package.
In the first tranche of measures, FM Sitharaman announced the collateral-free automatic loan with a four-year tenure for MSMEs with up to Rs 25 crore outstanding and Rs 100 crore turnover. The borrowers will have a 12-month moratorium on repayments. The Minister said it'll benefit at least 45 lakh units.
"In a major initiative, we announce Rs 3 lakh crores collateral-free automatic loans for businesses, including SMEs with a four-year tenure. Borrowers with up Rs 25 Cr outstanding and Rs 100 Cr turnover are eligible to apply by October 31, 2020. 100% credit is guaranteed on principal and interest and a 12-month moratorium on repayments, 45 lakh units to benefit," Sitharaman said.
Nirmala Sithraman has announced equity support of Rs 20,000 crore for stressed MSMEs through subordinate debt which is likely to benefit two lakh units. Those functioning MSMEs that have turned NPA are eligible. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will be provided Rs 4,000 crore of support from the government which will provide partial credit guarantee support to banks.
The Finance Minister has also announced a direct equity infusion of Rs 50,000 crore for MSMEs through a 'Fund of Funds' that will be operated through a "Mother Fund and few daughter funds". Sitharaman said the measure will encourage MSMEs to get listed on major stock exchanges and help them expand operations.
Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds; to be operated through a Mother Fund and few daughter funds; this will help to expand MSME size as well as capacity. #AtmaNirbharBharatAbhiyan #atmanirbharbharat pic.twitter.com/Y5FMC4TouI— PIB India #StayHome #StaySafe (@PIB_India) May 13, 2020
In a move to reform and broaden the spectrum of recognizing companies as MSME, the government will now adopted a new definition for MSMEs based on which investment limit will been revised upwards and additional criteria of turnover will also be introduced. The long-pending demand of companies has been met, the FM said, that'll increase the threshold for securing such benefits.
The distinction between the manufacturing and service sector will be eliminated, Sitharaman announced.
Finance Minister Nirmala Sitharaman said that global tenders in government procurement tenders will be disallowed for up to Rs 200 crores. She held that this will be a step towards Self-Reliant India (Aatmanirbhar Bharat) and support Make in India and will also help MSMEs to increase their business.
"Indian MSMEs and other companies have often faced unfair competition from foreign companies. Therefore, globals tenders will be disallowed in Government procurement tenders up to Rs 200 crores. Necessary amendments of General Financial Rules will be effected. This will be a step towards Self-Reliant India (Aatmanirbhar) and support Make in India. This will also help MSMEs to increase their business," said Nirmala Sitharaman.
Unfair competetion from foreign companies to become a thing of the past; Global tenders to be disallowed in Government procurement upto Rs 200 crores#AatmaNirbharBharatAbhiyan #atmanirbharbharat pic.twitter.com/voj3hstdOR— PIB India #StayHome #StaySafe (@PIB_India) May 13, 2020
In the sixth and the last measure, FM Sitharaman said the government and CPSEs (Central Public-Sector Enterprises) will pay all outstanding dues owed to the MSMEs within the next 45 days. "The government of India and CPSEs will honour every MSME receivable in the next 45 days," she said.
Also, the government will facilitate e-market linkage for MSMEs in the absence of trade fairs due to COVID pandemic, to allow them access markets and hunt clients without disruption.