The novel Coronavirus has shaken the world to its very core. Economies in every country have taken a major hit and leaders are looking for ways to get back on their feet – and quickly. Our Prime Minister, Narendra Modi, has been encouraging us to fight back and fight together. On Tuesday, the PM announced a massive Rs. 20 lakh Crore stimulus package that will aim to normalize the economy in this lockdown period. Modi said that this package will focus on small businesses and local manufacturers and help them survive during these difficult times. The amount provided by the PM is 10 percent of the country’s GDP. As announced in March, Rs. 1.7 lakh Crore of the package will be used to provide food grains and money to the poor as well as elderly and poor women respectively.
According to Modi, “a special economic package is being announced to make India self-reliant” during the COVID-19 pandemic. He called the stimulus package the “Atmanirbhar Bharat Abhiyan economic package”, which translates to a “Self-Reliant India Mission”. Apart from the poor, this relief package will be focusing on labour, land, laws, and liquidity and will target a number of industries, including MSMEs, cottage industries, the middle class, labourers, and other industries. Modi stressed on how we should be promoting “local” products and businesses to help strengthen the economy right now. However, the details of this package will be discussed further during the coming days and will be announced by the Finance Minister, Nirmala Sitharaman.
The COVID-19 Relief Package, as some are referring to it as, will essentially be used for every industry that is facing hardships during the Coronavirus outbreak. From the IT sector to the automobile industry and everything in between will benefit from this stimulus package. But how exactly will this “economic bailout” be used to stabilize, or at least attempt to stabilize the economy of the country? And how will the automobile industry be effected going forward? The following pointers are some of the ways Nirmala Sitharaman brought forward during her address and how the 20 lakh Crore will be distributed.
Sitharaman announced that Rs. 3 lakh Crore, from the 20 lakh Crore, will be issued as a collateral-free loan for the Micro, Small, and Medium Enterprises (MSMEs). This amount will help 45 lakh MSMEs so that they can return to normal and save the jobs so many of their employees are desperate for. A further Rs. 20,000 Crore has been issued as a subordinate debt for MSMEs under immense stress that will target another 2 lakh MSMEs. Rs. 50,000 Crore equity infusion will also be provided for Mother Fund – Daughter Fund MSMEs and Rs. 10,000 Crore for those MSME units that want to be listed in the market and expand. MSMEs will also be allowed to expand rather than lose benefits as per their definition. The distinction between the services sector and manufacturing MSMEs will also be removed. Sitharaman also included that Global Tenders up to Rs. 200 Crore will be disallowed for government contracts. The PSUs and Government of India will help clear the receivables for units that deal in e-market sales in the upcoming 45 days. The government will also provide e-market links for the non-participation in trade fairs due to COVID-19.
One of the biggest announcements made by the Finance Minister was that Rs. 2,500 Crore will be issued as EPF relief support and will be distributed to all EPF establishments. The Government will be making the EPF contribution for the next three months, till August 2020, which will help over 72 lakh employees across the country. The statutory EPF contribution for employees in an organization under the EPFO will be reduced from 12 percent to 10 percent. However, this will not apply to government employees and organizations. This drop will result in Rs. 6,750 Crore liquidity for the organizations.
The Government of India will be providing Rs. 30,000 Crore as a special liquidity scheme for investments in NBFCs, HFCs, and MFIs debt paper. The NBFCs benefiting here are the same ones that are funding the MSMEs in the country. Another Rs. 45,000 Crore will be issued to NBFCs as a Partial Credit Guarantee Scheme. In this scheme, the guarantor (the Government of India) will bear the first 20 percent of the loss.
The Government of India will provide a one-time injection of emergency liquidity that amounts to Rs. 90,000 Crore. This will be used against all the receivables borne by the DISCOMS. The individual states will guarantee this.
Central Government agencies such as the Ministry of Road Transport and Highways, Railways, and Central Public Works Department will be given a 6 month extension without the contractor having to bear the costs.
For the Real Estate industry, the Urban Development Ministry will be issuing advisories to the states and Union Territories so that Force Majeure can be invoked by the regulators. The regulators can also Suo Moto extend the registration or completion dates for those projects expiring on or after the 25th of March 2020, by six months.
The announcement was also made that rates for TDS and TCS will be reduced by 25 percent starting from the 15th of May, 2020 till the 31st of March, 2021. This reduction will release Rs. 50,000 Crore.
The date for filing Income Tax Returns will be extended from the 31st of July to the 30th of November. The Vivaad se Vishwas Scheme will also be extended till the 31st of December, 2020. The date of barring assessments will be extended from the 30th of September, 2020 to the 31st of December, 2020. The date of barring assessments will be extended from the 31st of March, 2021 to the 30th of September, 2021.
The Prime Minister listed the five pillars on which India’s self-reliance is based including, Economy, Technology Driven System, Infrastructure, Demand, and a Vibrant Demography. Stressing on the point that India will strive to make the best products and will be improving the quality and supply chain using only the high-quality resources found in the country.
It is a known fact that the automotive industry in India is a major pillar in the Make in India movement and contributes largely to the GDP of the country. The industry also creates employment opportunities for thousands and uses an indigenized supply chain. The package announced by PM Modi will come as a massive boost for the automotive industry, especially during this lockdown period. From the start of the lockdown, car manufacturers and two-wheeler manufacturers have been kept under lock and key. This has made it extremely difficult for organizations to hold onto their employees.
Although these manufacturers now have the permission to reopen showrooms and kick start production once again, they are handicapped as they cannot operate at 100 percent. The workforce in these facilities has reduced significantly due to the COVID-19 pandemic. A statement from SIAM, the Society of Indian Automobile Manufacturers, stated that the automotive industry was losing about Rs. 2,300 Crore on a daily basis. The President of SIAM, Rajan Wadhera believes that the stimulus package will also include aid for the automotive industry and will be of immense help.
More news and updates will be available as and when the Government of India releases their statements. As of now, the 20 lakh Crore will be helpful for a number of industries and will see the farmers, labourers, and the poor get the much-needed aid they deserve.