Editorial Team

On 13 May 2020, Union Finance Minister Nirmal Sitharaman announced the first part of Atma Nirbhar Bharat Abhiyan, or Self-reliant India Mission, an economic package of worth Rs 20 lakh crore or 10 per cent of India’s GDP in 2019-20. Including Rs. 3 Lacs Crores collateral-free loan scheme, India’s Ministry of Micro, Small and Medium Enterprises (MSMEs) sector would get a significant boost. Considered as the backbone of Indian economy, MSME’s can play a significant role in making India a self-reliant nation. However, due to the ongoing nationwide lockdown, many are struggling to run their businesses.

Now, we can hope that the government’s adequate measures would boost the fortunes of MSMEs and soon they will get back on their feet. While waiting for more announcements from the Finance Ministry, let us have a quick look at how industry captains are reacting to the Day 1 of India’s Economic Recovery Package Announcement.

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani

“Government measures towards improving liquidity and providing a boost to the MSME sector is also commendable. The Special Liquidity Scheme of Rs 30000 crore for non-banking financial companies, microfinance companies and housing finance companies will bring in liquidity in the market. The various economic measures announced by the government during COVID have given a powerful booster dose to revive the Indian economy. The resolution to remain self-reliant coupled with revolutionary reforms will surely lead the country on a high growth trajectory.”

Roma Priya, Founder, Burgeon Law

“India’s MSMEs sector is the largest across the world after China. MSMEs might be considered as small investment enterprises but their contribution to the Indian economy has always been noteworthy. Our homegrown enterprises have been hit hard by the pandemic and this move by the government lays a path for liquidity infusion, thereby giving them the necessary handholding. Many of our startups are facing a crisis with the liabilities and are waiting to resume activity and engage their workforce, at least for the next quarter.” 

Sumeet Srivastava, CEO & Founder, Spocto

“The Finance Minister’s declaration today arrived as a much-needed respite for aching souls, the proverbial silver lining in cloudy skies. The eagerly anticipated decision to proffer a 20 Lakh Crore bail-out package to the poor labourers, the SME’s, MSME’s and other ailing sectors is a visionary move on the central government’s part. Moreover, the provision of collateral-free loans worth Rs 3 Lakh Crore for MSME’s and will prove to be a timely panacea for the small enterprises that constitute the very backbone of India Inc. Also, the Prime Minister’s call for the country and its citizens to attain self-reliance in every aspect is most appreciable. We are filled with immense gratitude towards the government’s notable incentives and hope the whole of the Indian corporate and banking sector, both the public, as well as the private, will join hands to rescue the country from this perilous situation.”

Meghna Suryakumar, Founder and CEO, Crediwatch

“In our view, some of the measures which should be welcomed by small businesses in India are:

Global tenders barred from procurements up to Rs 200 crores: The Government’s e-procurement sites have typically been flooded by large foreign players who bring unfair advantage in terms of pricing and size. MSMEs working as ancillary units (e.g. autos, infrastructure) lose the bidding on smaller deals. The move should improve the competitiveness of Indian MSMEs on government contracts. It should also see an increase in registration by MSMEs and Mid-Market businesses on such platforms.

The new definition for MSMEs: This has been a long-pending demand from multiple industry associations. While MSMEs have tried to remain within a particular size in order to benefit from the MSME tag in the past, the new definition will promote them into growing further in size and scale.

Collateral-free automatic loans: While this extends the previous loan moratorium benefits, the new terms should benefit as many as 45 lac businesses and help with working capital requirements in coming days. We believe, setting the threshold for eligibility (Rs. 25 Crores outstanding and Rs 100 Crores turnover) is helpful but it is yet to be seen whether public sector banks will underwrite such unsecured loans at a faster pace on the back of these terms. The real-need of the hour is to move to cash-flow based lending.

Equity & Subordinate Debt infusion – The need for Long term capital will increase three months from now as businesses grapple with uncertain demand and high fixed costs. In our view, the Rs 70,000 crore facility should assist stressed MSMEs in raising funds as the tide turns.

While a technology-driven approach may pave a way to lower recurring costs in the future, the FM’s announcements today should ease the stress of a large number of promoters, partnership firms and small private limited entities. Coupled with lower TDS and TCS rates, the cash-in-hand should be prudently used by these MSMEs in the months to come.”

Anuj Aggarwal, Co-Founder and CFO, 247around

“I believe the steps are taken in the right direction. Today’s announcements are going to help a lot of companies.

Positives for us are the reduction in EPF rates for one quarter, TDS rate reduction and pending IT refunds. These all would help in creating additional liquidity in the near term.

Since MSMEs which don’t have existing loans or are not stressed/NPAs fail to qualify for the emergency credit line, I believe many small enterprises would not be able to solve their current issues like paying salaries, making vendor payments and buying material etc. And this would be a disappointment for those. We are still checking the finer details and discussing it with experts.

More direct and immediate benefits could help MSMEs to kickstart the business. Like support in employee wages, income tax benefits, instant loans basis GST profile without any conditions, and so on.”

Vikas Chaturvedi, CEO, Xanadu Realty

“We at Xanadu believe housing demand resurgence is the way to revive the economy. We hope and request soon our government will announce impactful measures to increase demand- be it through interest rate reductions, waiver of registration duty, tax incentives, subvention, and reduction of GST.”

 Sandip Chhettri, COO, TradeIndia.com

“The economic package details shared by the finance minister clearly shows the focus is extensively on the MSMEs who have been worst hit due to COVID-19 pandemic. It also shows the government’s intent to not only support small businesses during these unprecedented times but also to provide them with an opportunity to avail these benefits to sustain and grow. Among them what comes first is Rs. 3 Lacs Crores collateral-free automatic loans for businesses to meet operational liabilities, buy raw material and restart the business. Without an iota of doubt, this is going to be a great relief for the lockdown-hit MSMEs in every nook and corner country. The Rs. 3 Lacs Crore collateral-free loans with a 12-month moratorium will provide the much-needed boost to the already struggling MSMEs and will fulfil the government’s mission to be ‘vocal for local’. This will encourage manufacturing and will lessen our reliance on imports.

Then, to rescue the stressed MSMEs, the Finance Minister announced a package of Rs 20,000 Crores of subordinated debt benefit. In other words, while the first measure is of general kind, this one is aimed specifically at stressed MSMEs to push their liquidity. On the other hand, to help potential and viable MSMEs to expand their capacity, another Fund of Funds amounting to Rs. 10,000 Crore has been announced. Thus, the support measures address all major issues related MSME credit in a comprehensive manner.

Besides, today’s announcement is also remarkable in another way: it addresses a long-standing demand of the MSME sector to change the decade-old definition of the sector. As per this new definition, any firm with investment up Rs 1 crore and turnover under Rs. 5 Crores will be classified as Micro, up to Rs. 10 crore investment and up to Rs 50 crore turnover as Small and Rs. 20 Crores investment and turnover under Rs. 100 Crores as Medium. Here again, both investment and turnover aspects are taken care of, with increase in the previous investment limits. Similarly, two other key issues facing the sector are addressed as well. First, complaints are often raised that in the government procurement process MSMEs often face unfair competition from large foreign companies, and therefore now global tenders to be disallowed in government procurement up to Rs. 200 Crores. Second, delayed payment is a lingering issue for the sector and to get rid of it the government now announced that the Centre and Central Public Sector Enterprises will honour every MSME receivable in the next 45 days. Thus, these two long-pending demands are met in a single stroke.

In addition, the Finance Minister said that E-market linkage will be provided for all MSMEs as a replacement for trade fairs and exhibitions during this period. Some other measures, such as a support of Rs. 4,000 Crores to CGTMSE; extension by another three months the scheme under which the government pays the EPF contribution of employees and employers, Rs. 45,000 Crores infusion to NBFC, HFCs and MFIs, etc. are going to immensely benefit the MSME sector indirectly. Overall, I think this economic stimulus will prove to be a game-changer for Indian businesses.”

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