By Iqbal Abhimanyu
New Delhi, May 13 (efe-epa).- Indian Finance Minister Nirmala Sitharaman on Wednesday announced loans worth $40 billion to help small and medium-sized industries as part of a $266 billion financial package to boost liquidity in the economy, which has been brought to a standstill by a prolonged COVID-19 lockdown.
Sitharaman held a press conference to announce the measures a day after by Prime Minister Narendra Modi launched the stimulus plan as part of the “Atmanirbhar Bharat Abhiyan” (campaign to make India self-reliant), which focuses on boosting local manufacturing and supply chains.
“This (campaign) is to spur growth and to build a very self-reliant India, (…) take local brands and build them up to a global level. (…) It is not to look inwards to become an isolationist country,” Sitharaman said.
The minister announced collateral free loans worth 3 trillion rupees ($40 billion) for micro, small and medium enterprises (MSMEs), which are expected to help around 4.5 million businesses to “resume their business activity and also safeguard jobs.”
She also announced subordinate debts worth 200 billion rupees ($2.6 billion) for debt-ridden MSMEs, to be channeled through banks, apart from setting up a “fund of funds” to provide equity funding to selected small and medium businesses.
To be set up with an initial corpus of 100 billion rupees ($1.3 billion), the fund is expected to raise 500 billion rupees ($6.6 billion) and will be used to encourage MSMEs to expand and get listed on the stock exchange.
In another move to broaden the net of the stimulus, the government also changed the definition of the MSMEs to include all business with an investment of less than 200 million rupees ($2.6 million) and an annual turnover of less than 1 billion rupees ($13 million), under different categories.
The announcements are in line with Modi’s speech on Tuesday that emphasized on local supply chains being strengthened and appealed to citizens to buy locally-made products.
“The 21st century is India’s century. (…) The current world situation tells us that the only path to this (dream) is a self-reliant India,” the prime minister had said.
In order to boost Indian businesses, Sitharaman announced that tenders of government projects up to 2 billion rupees will be closed for global bidders, citing “unfair competition from foreign companies.”
In other measures, the government extended its relief contributions into provident funds – retirement funds for formal sector employees – until August, having initially announced the support between March-June.This would benefit 367,000 businesses and 7.2 million employees according to the government.
The finance minister also announced tax reliefs for both individuals and businesses – including immediate payment of income tax refunds – sanctioned 150 billion rupees for an emergency health package and announced special liquidity schemes for non-banking financial institutions as well as home loans and micro-finance firms.
The government said it would issue loans to power supply corporations, which were struggling from a severe cash-flow crunch during the lockdown.
The overall $266 billion package mentioned by Modi includes earlier measures worth $22.5 billion announced by the government in late March for providing direct cash transfers and food security to millions of poor people hit by the nationwide lockdown.
It also takes into account liquidity worth 500 billion rupees ($6.55 billion) offered by India’s central bank to financial institution in April as the COVID-19 restrictions were extended.
On Tuesday Modi had indicated that the lockdown – enforced since Mar. 25 – would be extended beyond the current deadline of May 17, but with more relaxations.
The coronavirus epidemic has so far infected around 75,000 patients and claimed nearly 2,350 lives in India.
The lockdown, suspension of transport, and the closure of most businesses have triggered an unprecedented humanitarian and economic crisis in the $2.9-trillion economy, which was already weakening before the lockdown, with the highest unemployment rates in decades. EFE-EPA