‘We have to think local’

A day after India's Prime Minister Narendra Modi urged the country to be self-reliant, Finance Minister Nirmala Sitharaman yesterday announced a slew of measures to help businesses, including micro, small and medium enterprises (MSMEs), recover from the economic impact of the coronavirus pandemic.

The 20-trillion-rupee (US$266 billion) relief plan for Asia's third-largest economy came as the country enters its 50th day under the world's biggest shutdown yesterday.

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Modi also announced the extension of lockdown after May 17 in a "completely different form", with new rules.  The Indian leader stressed the need for the country to be self-reliant, and for people to buy local products to help the economy.

"The corona crisis has also taught us the importance of local supply chains... we have to now think local," he said.

In the first of her several addresses to outline the contours of the package, Sitharaman announced 15 different measures yesterday, which involved MSMEs (Micro, Small and Medium Enterprises)  NBFCs (Non-Bank Financial Companies), Provident Fund, Real Estate and Taxation. 

To allow more liquidity in the hands of the people the government offered a 25 per cent reduction in Tax Deduction at Source for non-salaried specified payments and Tax Collection at Source for specified receipts.

The government also said it would pay the EPF contribution for employees of MSMEs to help them recover from the crisis.

The finance minister said the intention of the her ministry is to build local brands, and integrate them into global supply chain and not meant to look inwards and cut India to be an isolated country, but to continue contributing to the globe.

"Self-reliant India does not mean cutting off from rest of the world. Many reform driven steps are successfully taken by this govt, from 2014-19. For the poor, brought in DBT based reforms, based on Jan Dhan, Aadhaar and mobile technology, which has helped deliver to migrants now," she explained.

She announced Rs 3 lakh crores collateral-free automatic loans for businesses, particularly MSMEs.

Collateral free loan to be provided to SMEs with 12 month moratorium; 45 lakh units to benefit, she said, announcing parts of the economic package. For stressed MSMEs, Government to facilitate provision of 20,000 crore rupee subordinate debt for equity support. 2 lakh MSMEs likely to benefit.

India was already battling a liquidity crisis, bad loans and rising unemployment even before the pandemic. Some 122 million Indians lost their jobs last month, data showed, with small traders and daily wage earners accounting for the bulk of losses.