Self Reliant India(#AatmaNirbharBharat)
In light of the COVID 19 pandemic, PM Modi announced an economic package worth Rs 20 lakh crore or 10% of the GDP to enable a foothold for the country's economic self-reliance.
The special economic package is for our laborers, farmers, honest taxpayers, SMEs, and cottage industry. The special economic package will have an emphasis on land, labor, liquidity, and laws.
Finance Minister Nirmala Sitharaman unveiled the details of 20 lakh crore package in tranches. This blog will help you understand the areas covered in tranche 1 in detail:
15 different measures to be taken in 7 categories:
Category 1 :
6 pertaining to the micro, small and medium enterprises (MSMEs):
1. Rs 3 lakh crores collateral-free automatic loans for businesses, including MSMEs: - Loan for a period of 4 years - No Principle amount for first 12 months - Government will be the guarenteer (Will help companies to get cash needed to restart the business after lockdown) 2. Equity support to stressed MSME's. Facilitating the provision of Rs. 20,000 crores as subordinate debt 3. A fund of funds being created for infusing about Rs 50,000 cr as equity into MSMEs, the corpus of the fund being Rs 10,000 crore (This investment will be in companies with growth potential and sustainable business models) 4. Changing the definition of MSMEs by revising upwards the investment limit and bringing in additional criteria of turnover size of the company
Table Source: PIB India
5. For government procurement, tenders up to 200 crores will no longer be on global tender routes. - (That means foreign companies will not be allowed to bid for these tenders. This will help empowering the PM’s call for self reliant India) 6. e-market linkage across the board for MSMEs. (This will help MSME's to function in the absence of Trade fairs, exhibitions and mass participation events of industries)
Category 2 :
2 related to Employees' Provident Fund:
For the next three months, Government will contribute towards EPF on behalf of select businesses*. 1. EPF contribution that employers and employees make every month has been reduced from 12% to 10% 2. This is expected to provide a total of Rs 6,750 crore in hands of employers and employees. (This implies that the take home salary will increase for the next three months. Also, the employer will have a lesser burden) *This is for those establishments which have upto 100 employees and 90% of them earn less that INR15,000
Category 3 :
2 related to non-banking finance companies (NBFCs), housing finance companies (HFCs) and micro-finance institutions (MFIs)
1. A special liquidity scheme of 30,000 crore is announced for non-banking financial institutions to provide credit support to the sector amid the coronavirus crisis. (Investments will be made in both primary and secondary market transactions in investment-grade debt papers of these institutions) 2. A Rs 45,000 crore partial credit guarantee scheme 2.0 was also unveiled for NBFCs, HFCs, and MFIs with low credit rating to help them extend loans to individuals and MSMEs.
Category 4 :
1 step for Discoms :
For power distribution companies(Discoms), the government will give Rs 90,000 crore against their receivables, so they can pay for the power they have purchased (The money will be guaranteed by the respective states)
Category 5 :
1 Step for contractors:
The deadlines for work being done by contractors for central agencies like railways will be extended by six months without any penalty to the contractors. The government will also release bank guarantees to the extent of the contract completed to ease cash flows.
Category 6 :
1 Step for real estate:
The completion date of projects expiring on or after March 25, 2020, will be extended by another six months. (To de-stress real estate developers, the Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to treat COVID-19 as an act of God under RERA)
Category 7 :
3 tax measures:
1. The rates of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) will be reduced by 25%, with effect from May 14, 2020, to March 21, 2021 for non-salaried payments. 2. The date of filing Income tax returns will be extended to November 30, 2020, and that of tax audit to October 31, 2020. 3. All pending refunds to charitable trusts and non-corporate businesses professions, including proprietorship, partnership, LLP and Co operatives, will be issued immediately by the Government.
Stay tuned with us, for understanding the details of the AatmaNirbharBharat package in the easiest way