In our previous article we took a look at the PM Modi’s speech where he stated that the government would take all possible measures in an effort to convert the current crisis into an opportunity. You can read it here.
Taking it ahead from where Prime Minister Narendra Modi concluded his address to the nation on Tuesday, Finance Minister Nirmala Sitharaman announced the first leg of the post-pandemic financial package to help boost the economy.
Instead of giving you detailed information, let me share my analysis that will be of more relevance to you.
The first of the three announcement tranches focused heavily (6 announcements) on MSMEs and primarily because of the employment concentration there.
Government means business
The measures showcase that the government means business and is ready to give the required confidence to help propel both – employment and demand.
And that is exactly what was showcased by the Finance Minister yesterday when she said that the Rs. 3 lakh crore loans can be availed by the MSMEs would be collateral free minus of any fees & will be guaranteed by the government.
The same was shown when she said that the government will facilitate Rs. 20,000 crore liquidity as subordinate debt for stressed MSMEs which are in need of equity support or Rs. 50,000 equity infusion in MSMEs through equity funds of funds.
Boost for NBFCs
Moving on, for the NBFCs there will be an additional pumping of Rs. 75,000 crores for NBFCs, HFCs and MFs. Of this, the GOI will provide partial credit guarantee worth Rs. 45,000 crores. This will further enhance liquidity in the markets and help boost businesses & demand.
The next big announcement was with regards to EPF. Again – the sole reason is to boost overall liquidity in the system and hence give a boost to demand.
Reduction of TDS rates
The last of the big steps was the reduction of TDS rates by 25%, and this will be applicable to all non-salaried specified payments made until 31st March 2021 – just another step towards leaving more disposable income in the hands of the people.
And there were other announcements with regards to Rs. 90,000 crores in DISCOMS to as a one-time emergency liquidity infusion and the relaxation of RERA rules by citing Covid-19 as an “Act Of God” and hence allowing extension of registration and completion dates of real estate projects.
The government is showing signs that it wants to fast track the recovery process.
Saying this, I am looking forward to the announcements made in the last few days as I am looking forward to more steps taken by the government towards boosting businesses in India and also inducing demand growth.