Will FM Nirmala Sitharaman’s relief package for MSMEs work? Check what experts said

The government on Wednesday evening announced a mega relief package of Rs 6 lakh crore comprising Rs 3 lakh crore of collateral-free loans for small businesses and a Rs 30,000 crore lifeline to non-bank and housing finance companies as part of measures to help the economy tide over disruptions caused by the coronavirus lockdown. This was the first set of components of the Rs 20 lakh crore COVID-19 economic stimulus package announced by Prime Minister Narendra Modi.

Industry experts have welcomed the measures, hoping that they will help MSMEs to get back on their feet. 

“MSMEs are India’s backbone. Today’s measures by FM Nirmala Sitharaman will help them get back on their feet. Additional collateral & guarantee free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds are strong enablers. Liquidity & credit guarantees for banks & NBFCs will help remove hesitation in lending. Friction-free implementation of these measures can slowly convert adversity to advantage,” Kunal Bahl, Co-Founder & CEO, Snapdeal said. 

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A major reform came in the form of change in the definition of MSMEs, a move that is also expected to allow more companies to claim benefits under the special provisions for the MSME sector, said Pushkar Mukewar, Co-Founder and Co-CEO, Drip Capital.

“With Rs. 3,70,000 crore earmarked for the MSME sector in various forms, including collateral-free loans, subordinate debt, and equity fusion, the government has surely come out guns blazing to tackle the crisis looming over the Indian economy. In particular, the sweeping reform of definitions for Indian MSMEs will play a significant role in allowing more companies to claim benefits under the special provisions for the MSME sector. India had 6.33 crore MSMEs as of December 2019 and the new definitions will ensure these numbers swell substantially. Further, almost 50% of Indian exports come via MSME units, and the growth in MSME numbers will likewise increase their contribution to India's export basket,” he said.

“Finance Minister’s announcement is in line with the government’s aim to provide the necessary impetus to economic growth and build a ‘self-reliant’ India. We welcome the announcement of all pending payments within 45 days from PSEs to MSME sector. The telecom industry has unutilized GST input tax credit over INR 35,000 crore for which the sector has repeatedly demanded refund,” Rajan S Mathews, DG, COAI said.