Monday, November 30, 2020

Economic Package : Retailers react to Covid relief package for MSMEs

By Retail4Growth Team | May 14, 2020

The package involved government-backed collateral-free loans worth Rs 3Lakh/crore to MSMEs. These loans will have a 4-year tenure and moratorium for 4 months

Union Finance Minister Nirmala Sitharaman announced a series of measures in assistance to micro- and small businesses that are facing severe cash, steps to boost liquidity for non-banking financial companies (NBFCs) and offering tax measures for individuals and corporates. The move comes amid the coronavirus-induced nationwide lockdown which has rattled the country's economy.  

Retailers welcomed the stimulus announcement made by the Finance Minister and said the move will improve liquidity and credit flow into MSMEs and NBFCs and smaller businesses.

As Kumar Rajagopalan - CEO, Retailers Association of India (RAI) said, “There are some measures that retailers can definitely benefit from such as the reduction in TDS rates for payments—this is a welcome sign as it helps keep liquidity back with businesses. The other is the 2% reduction each in the EPF contribution of both, the employer and employee, which again gives cashback in the hands of people who need it in the immediate term. Other measures that will play a big role in accelerating the revival of MSMEs include the statutory relaxation, collateral-free loan support, debt relief and equity infusion.”

Roma Priya, Founder of Burgeon Law remarked, “India’s MSMEs sector is the largest across the world after China. MSMEs might be considered as small investment enterprises but their contribution to the Indian economy has always been noteworthy. Our homegrown enterprises have been hit hard by the pandemic and this move by the government lays a path for liquidity infusion, thereby giving them the necessary handholding.”

Meghna Suryakumar, Founder and CEO, Crediwatch shared, “While Collateral-free automatic loans extend the previous loan moratorium benefits, the new terms should benefit as many as 45 lac businesses and help with working capital requirements in coming days. We believe, setting the threshold for eligibility (Rs 25 cr outstanding and Rs 100 cr turnover) is helpful but it is yet to be seen whether public sector banks will underwrite such unsecured loans at a faster pace on the back of these terms. The real-need of the hour is to move to cash-flow based lending.”

Bhavin Turakhia-CEO and Co-Founder of Zeta said, “Government’s decision to boost liquidity through EPF support and the reduction of 10% out of the existing 12% each for all is highly commendable.The decision to disallow global tenders up to 200 crores is likely to be seen as a protectionist move. It is important that we continue to be perceived as a global economy. Startups will have an important role to play in this difficult journey and we are hopeful that the announcements that will follow over the next few days will address this constituent with the same generosity.”

Sandip  Chhettri, COO, mentioned, “Without an iota of doubt, this is going to be a great relief for the lockdown-hit MSMEs in every nook and corner country. Besides, this announcement is also remarkable in another way: it addresses a long-standing demand of the MSME sector to change the decade-old definition of the sector. As per this new definition, any firm with investment up Rs 1 crore and turnover under Rs 5 crore will be classified as Micro, up to Rs 10 crore investment and up to Rs 50 crore turnover as Small and Rs 20 crore investment and turnover under Rs 100 crore as Medium. Here again, both investment and turnover aspects are taken care of, with an increase in the previous investment limits.”

He further added, “The two other key issues facing the sector are addressed as well. First, complaints are often raised that in the government procurement process MSMEs often face unfair competition from large foreign companies, and therefore now global tenders to be disallowed in government procurement up to Rs 200 crore. Second, delayed payment is a lingering issue for the sector and to get rid of it the government now announced that the Centre and Central Public Sector Enterprises will honor every MSME receivable in the next 45 days. Thus, these two long-pending demands are met in a single stroke.”




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