Self-reliant India movement-2

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Equity infusion will be done through the Fund of Funds. Equity funding will be provided for MSMEs with growth potential and viability. The FoF will also be operated through what has been termed as a ‘Mother Fund’ and few ‘daughter funds’ will help leverage Rs 50,000 crore of funds at daughter funds level. This will help to expand MSME size as well as capacity in one hand and will encourage MSMEs to get listed on the main board of Stock Exchanges in the other hand.

New Definition of MSMEs

Since the low threshold in the definition of the MSMEs has created a fear and confusion among MSMEs of graduating out of the benefits and hence killing the urge to grow, there has been a high demand for revisions.
Finally, according to the announcement, the definition of MSMEs will be revised. As per the revision, the investment limit will be revised upwards with additional criteria of turnover being introduced. Distinction between the service sector and the manufacturing to be eliminated and amendments to the law will be brought about.

Additional Facilities to MSMEs

Indian MSMEs usually face unfair competition from large foreign companies, therefore, the government of India has introduced a strategy to not allow global tenders of up to Rs. 200 crores. This will prevent global tenders from putting forth their application for government procurement tenders of up to Rs, 200 crores. Allowing MSMEs this facility will be a step towards achieving self-reliant India.

As MSMEs usually have a hard time surviving the competition put forth by large foreign enterprises, this step ensures that MSMEs will increase their business transactions.

Employment Provident Fund

As enterprises and employees continue to face financial stress due to the COVID-19 crisis, under the Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contribution as made into Employment Provident Fund (EFP) accounts of eligible establishments. This was organized for the past three months, March, April and May 2020 and will now be extended by another three months, June, July and August 20202. This contribution will provide liquidity relief of Rs. 2500 crore to 3.67 lakh establishments and for 72.22 lakh employees according to the government of India.

Special Liquidity and Partial Guarantee Scheme for NBFCs/HFCs/MFIs
NBFCs/HFCs/MFIs are finding it difficult to raise money in debt markets due to COVID-19. The government is planning to launch a Rs 30,000 crore Special Liquidity Scheme under which investment will be made in both primary and secondary market transactions in investment-grade debt papers of NBFCs/HFCs/MFIs. This will supplement both the RBI’s and the government’s measures to augment liquidity. The securities for this will be fully guaranteed by the government of India. This is likely to provide liquidity support for HFC/NBFCs/MFIs and the mutual funds as well as create confidence in the market.

As economic activity is down, NBFCs, HFCs and MFIs with low credit ratings require liquidity to do fresh lending to MSMEs and individuals. The existing PCGS scheme, therefore, will be extended to cover the borrowings, including the primary issuance of CPs/Bonds (liability side of balance sheets) of such entities. The first 20% of loss will be borne by the guarantor, which is the government of India. This scheme will result in the liquidity of Rs 45,000 crores

Liquidity injection for DISCOMs

As the Revenues of Power Distribution Companies (DISCOMs) have plummeted due to COVID-19, the government has decided to inject Rs. 90,000 crore for DISCOMs. It should be noted that the problem of unprecedented cash flow has been accentuated by demand reduction. Furthermore, the DISCOM payables to power generation and transmission companies has currently been Rs 94,000 crore.

In order to manage the situation, PFC/REC is to infuse liquidity of Rs 90,000 crore to DISCOMs against receivables. With this, the loans will now be granted against the State guarantees for some exclusive purpose of discharging liabilities of Gencos and Discoms. Alongside, the digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments, Plan to reduce financial and operational losses will be conducted. Finally, central Public Sector Generation Companies shall give rebates to Discoms which shall be passed on to the final consumers (industries).

Relief to contractors

Addressing the problems faced by the contractors, extension of up to 6 months (without costs to the contractor) is to be provided by all Central Agencies such as Railways, Ministry of Road Transport & Highways, Central Public Works Department (PWD), etc. This also covers construction/ works and goods and services contracts. Similarly, obligations like completion of work, intermediate milestones, etc. and extension of the Concession period in PPP contracts is included in the relief package. The government agencies will partially release bank guarantees to the contracts are partially completed.
Real Estate Projects under RERA
The real estate projects have been facing an adverse impact due to COVID. These projects stand the risk of defaulting on RERA timelines demanding the need to extend the timeline. To stabilize the problem, Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:

Treat COVID-19 as an event of ‘Force Majeure’ under RERA.

Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March 2020 without individual applications. Regulatory Authorities may extend this for another period of up to 3 months if needed. Issue fresh ‘Project Registration Certificates’ automatically with revised timelines. Extend timelines for various statutory compliances under RERA concurrently. The above-mentioned measures will de-stress real estate developers and ensure completion of projects so that homebuyers can get delivery of their booked houses with new timelines.

Tax Measures

In an effort to provide funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for the non-salaried payments have been made to residents and rates of the Tax Collection at Source (TCS) for the specified receipts will be decreased by 25% of the existing rates. This announcement is a huge relief to every taxpayer. Payments like a contract, interest, rent, professional fees, commission, dividend, brokerage, among others will be eligible for this reduced rate of TDS. This reduction is to apply for the remaining part of the FY 2020-21 to 31st March 2021. This measure is expected to release the Liquidity of Rs. 50,000 crore.

Furthermore, the pending refunds to partnerships, charitable trusts and non-corporate businesses or professions including proprietorship, LLP and Co-operatives will be issued at the instantly. The due date of the income tax returns for the fiscal year 2019-20 will be extended from 31st July 2020 & 31st October 2020 to 30th November 2020 and Tax audit from 30th September 2020 to 31st October 2020.

Likewise, the date of assessments getting barred on the 30th of September this year will be extended to 31st December 2020. For those getting barred on 31st March 2021 will be extended to 30th September 2021.

Similarly, the period of Vivad se Vishwas Scheme to make payments without an additional amount will be extended to 31st December 2020.

Conclusion: Lessons to be learnt from India’s Self-Reliant Movement
The government of India has put forth an innovative plan to boost economic activity during and after the COVID-19 pandemic. Instead of waiting for the crisis to be over India has taken this opportunity to plan ahead of time to boost not only the economic activity but also boost morale and confidence. These measures and steps taken by India can be a learning lesson to other South Asian countries in the trying times of the COVID-19 pandemic.

The bottom line: Every crisis is a risk for the economy but every risk presents itself with new opportunities. Economic activity can only increase if and when the population’s morale and confidence are boosted. MSMEs are crucial for the economy, therefore should be protected and given priorities.

Adequate and appropriate attention and justice for all, from poor to rich population, is essential in times of a crisis. It is never too late to bring new ideas, relief packages, and schemes to uplift the economy, address people’s and enterprises’ needs in a recession.

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