Stage set for rebuilding economy, says Dr Reddy
Focus on getting liquidity into the system, generating consumption demand and propping up investments are the greatest take away from Finance Minister’s details on the Prime Minister’s Rs.20 lakh crore economic package.
“The greatest takeaway from today’s announcement was the clear focus on getting liquidity flowing into the system. Besides liquidity, we need to give equal focus on generating consumption demand and propping up investments,” said FICCI President Dr Sangita Reddy in reaction to the Government’s economy rebuilding measures.
“With today’s comprehensive set of announcements, the stage is now set to rebuild the Indian industry and economy. Listening to the Finance Minister and the series of measures spelt out gave us the confidence that our government is ready and will lead from the front in taking India out of the covid-19 storm and emerge bigger and stronger.
“And as the country moves ahead it will ensure that every individual, every enterprise, and every section of society is taken along in a guided manner so that the impact of the turmoil is cushioned in the best possible manner. FICCI thanks the Finance Minister for the Stimulus Package 2.0 and looks forward to more such measures in the ensuing days,” said Dr Reddy.
The MSME sector has been facing the maximum brunt of covid-19 induced lockdown and many of our constituents from across the country were looking forward to the relief measures to be announced by the government.
With a breakdown in their cash flow cycle, MSMEs require money to restart operations as well as to continue to meet their fixed costs.
FICCI had as part of its Fiscal Response Strategy shared with the Finance Minister requested for collateral free loans to be given to MSMEs with government guarantee.
The Rs.3 lakh crore package geared towards this is most welcome and it should help bring back to like a large proportion of our MSMEs, she said.
Also, applauded was the government announcing another Rs.20,000 crore of funds to be provided to stressed MSMEs and setting up a fund of funds worth Rs.50,000 crore that could take up equity in viable MSMEs and thereby pave the way for their listing on the market is a novel approach that will come in handy for the cash starved but viable business entities.
Clearing of the receivables for MSMEs due from CPSEs and other central government departments in the next 45 days will also bring back liquidity in the system and help units as they plan to restart their operations.
Besides these direct liquidity infusion measures, the government has given MSMEs another shot in the arm by declaring that all public procurement tenders up to Rs.200 crore will no longer be global tenders.
“This will help in bringing more business to Indian MSMEs and create greater opportunities for them in government projects and procurement areas that can be substantive,” said Dr Reddy.
On support extended on payment of statutory dues, the 3-months extension given to the earlier announced measure of government contributing both the employer and employee share in PF within certain limits is a noteworthy move.
Another sector that came in for special mention today was NBFC, HFC and MFI sector. The clear developmental role of these players was recognised by the government and as an acknowledgement of their contribution to promoting growth by delivering credit to the underserved segments of society, the government announced two special lines.
A special government guaranteed liquidity line worth Rs.30,000 crore and extension of the Partial Credit Guarantee Scheme by Rs.45,000 crore with first loss default cover of 20% was notable.
On the power sector, the need for reforms is urgent and long overdue. While the infusion of liquidity to the tune of Rs.90,000 crore in DISCOMs against their receivables by PFC and REC will help DISCOMS discharge their payments to Gen-Cos, a longer-term approach to make the sector sustainable is required.
“Nevertheless, we hope more reform measures will be announced with time,” said the FICCI president.
The relief offered to contractors undertaking infrastructure projects in terms of extending the timelines for completion of projects, construction related milestones without attracting any penalty should offer some succour to them.
However, the larger support that comes to them is in the form of release or repayment of bank guarantees linked to the completion of the projects. This would be helpful and players in the infrastructure sector were seeking such relief. In the same light, the declaration of covid-19 as force-majeure under RERA should de-stress players in the real estate sector.
FICCI is hopeful that more such measures will be announced by the government in the coming days and it will see greater thrust being laid on some of the most battered segments of industry including tourism, hospitality, aviation and healthcare.
FICCI has requested that a minimum amount of Rs.20,000 crore be allotted for these sectors as they have seen maximum dip in demand and will also take much longer to recover from the set-back seen.
Healthcare sector also needs huge impetus in order to build capacity to fight the Covid-19 menace effectively. The sector is trying to make its contribution but needs support to sustain its efforts.
The government also needs to plan for more support for the migrant workers and the more vulnerable sections of society, added Dr Reddy.
Finally, large corporates have also been significantly affected. FICCI has recommended a need for COVID liquidity bridge for providing guarantee to banks to give them comfort to restructure/ extend loans to companies whose balance sheets have been impaired due to Covid-19.
Government needs to provide an amount of Rs.10,000 crore in first year towards this, which is a small amount of support needed but can have significant impact on companies and economy, said Dr Reddy. fiinews.com
