Government announces mega relief effort to counter COVID-19

Finance minister Nirmala Sitharaman announced a slew of remedial measures to alleviate the sufferings of the people affected by the lockdown in the wake of the COVID-19 outbreak. These measures focused on getting back to work, ie enabling employees and employers, businesses, especially MSMEs to get back to production and workers back to gainful employment. There were also steps initiated to strengthen NBFCs, housing finance companies, micro-finance institutions and firms in the power sector. The package also contained tax relief to businesses, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector.

“Essentially, the goal is to build a self-reliant India that is why the economic package is called Aatmanirbhar Bharat Abhiyaan,” said Nirmala Sitharaman, adding the focus of the efforts would be on land, labour, liquidity and law.

Prime Minister Narendra Modi had announced a special economic package valued at  Rs20 lakh crore – equivalent to 10% of India’s GDP – as part of the efforts to rebuild India. He coined the phrase ‘Aatmanirbhar Bharat’ or Self-reliant India’ and outlined 5 pillars on which the self-reliance efforts would be based – economy, infrastructure, system, vibrant demography and demand.

Some of the measures announced by Nirmala Sitharaman are:

1. Rs 3 lakh crore emergency working capital facility for businesses, including MSMEs. The amount will be 100% guaranteed by the government of India providing a total liquidity of Rs 3 lakh crore to more than 45 lakh MSMEs.
2. Rs 20,000 crore subordinate debt for stressed MSMEs numbering about 2 lakh. The government will support them with Rs 4000 crore to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE).
3. Rs 50,000 crore equity infusion through MSME Fund of Funds
4. New definition of MSMEs by raising the investment limit. An additional criterion of turnover is also being introduced. The distinction between manufacturing and service sector will also be eliminated.
5. No global tenders for government tenders of up to Rs 200 crore in order to promote ‘make in India’ efforts.
6. Employees Provident Fund support for business and organized workers through the scheme introduced as part of PMGKP under which the government of India contributes 12% of salary each on behalf of both employer and employee to EPF. This will be extended by another 3 months for salary months of June, July and August 2020. EPF contribution to be reduced for employers and employees for 3 months
7. Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs, the liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs.