India's relief package

Unlike most of the relief packages announced globally, The Indian government had come up with a relief package of 20 lakh-crore on 15/05/2020.

The package was mentioned by our honorable prime minister in there speech, which was later introduced by our finance minister (Nirmala Sitharaman)

                                 

The relief package announced is basically for:-

• Farmers
• Laborer
• MSMEs
• Cottage industries

The major item covered in the package includes:-

                I.          Pradhan Mantri Gareeb Kalyan Package, which was already announced in the previous budget but is still considered in 20lakh crore package, it includes:-

·       Insurance cover of ₹50 lakhs per health of a worker.

·       ₹20crore women Jan Dhan account holder shall get ₹500 per month for the coming 3 months.

·       Increase in MNREGA wage to ₹202 per day from ₹182 per day to benefit 13.62 crore families.

·       Front-loaded ₹2000 paid to farmers under existing PM Kisan Yojana to benefit 8.7 crore farmers.

·       EX Gratia of ₹1000 to over 3 crores to, poor, senior citizens, widows, and divyang.

·       Other such aspects were covered in this scheme.

              II.          Monetary Benefits are given by RBI:-

·       Reduction in Cash Reserve Ratio (CRR)

 “Amount which the banks are supposed to maintain with RBI”

has being reduced to improve the lending capacity of the banks and hence has resulted in liquidity enhancement of ₹137,000 crores in the economy.

               

·       Special Liquidity facility (SLF) of ₹ 50,000 crores is provided for a mutual fund to alleviate intensified liquidity pressure

Means, due to COVID'19 Pandemic, many  have started to withdraw their funds from mutual funds and cash crunch to mutual fund companies have resulted in shut down of various fund schemes, to prevent such a situation government had provided special Liquidity facility to mutual fund companies.

·       Moratorium of 3 months on payment of installment and repayment of interest on working capital facilities in respect of term loan,

Such a facility is for everyone who is ought to repay installments/ EMI towards the repayment of loans a relief for 3 months period is provided by the government after considering the present crisis due to COVID'19 Pandemic.

            III.          MSMEs the scheme mentioned in 20 lakh crore package:-

                                     

·       3 lakh crore worth collateral-free and guarantee free loans are announced for MSMEs,

           The definition of MSMEs is also been revised to avail such a scheme

           Existing Investment criteria for classifying as MSME:-

Particulars	Micro	Small	Medium
Manufacturing Enterprise	Inv<25lakh	Inv<5cr	Inv<10cr
Service Enterprise	Inv<10lakh	Inv<2cr	Inv<5cr

  New revised investment criteria for both manufacturing and service         enterprise for 20lakh crore package:-

Particular	Micro	Small	Medium
Investment	<1cr	<10cr	<20cr
Turnover	<5cr	<50cr	<100cr

·        Emergency credit line facility to business/MSMEs from bank and NBFCs up to 20% of entire outstanding credit facility as on 29/02/2020

Means if an MSME has up to 25crore worth outstanding borrowing and 100crore worth of turnover can available up to 20% of debt/loan already taken before the pandemic, and the loan is for 4 years tenure with a moratorium of 12 months on principal repayment(for 12 months amount towards principal repayment is not required only towards the interest part shall be paid after 12 months principal + interest installment shall begin).

Interest is to be capped(interest for the period of 12 months shall be capitalized in loan principal amount and then after 12 months the repayment shall begin)

Loan granted is sanctioned without guarantee and no need for fresh collateral is required.

₹50,000Crore worth equity infusion for MSMEs through fund facility is also granted.

And ₹10,000 crores will be set up for new growth emerging sectors in the economy.

            IV.          Facilities for NBFC Sector:-

₹30,000crore worth special equity facilities shall be granted in which government shall buy investment-grade debt paper of NBFCs and these securities will be fully guaranteed by the government

                    

₹45,000crore worth partial credit guarantee scheme 2.0 is issued for NBFCs.

              V.          Measures for DISCOM & Contractors:-

Major infrastructure project contractors have got extension up to 6 months to complete their projects and ₹90,000crore credit facility is also provided.

                        

Global tenders in government procurements will be disallowed for up to ₹200crore or less, this will allow MSMEs contractors a chance to supply for big projects and nearly 3.6lakh establishment shall be benefited which is expected to generate employment. 

            VI.          Income tax return filing measures:-

Income tax return filing for an individual is pushed forward from 31/07/2020 to 31/10/2020.

Non-salary individuals TDS/TCS have been reduced by 25% which shall result in 50,000 crore worth liquidity in the economy.

                           

Government shall also provide EPF(employee provident fund) relief for all establishment with ₹2500crore liquidity support.

      "Overall the major pillars of the package are highlighted most of the measures used by the government to revive the economy are not direct majors like providing monetary help directly to it's citizen in hand (in form of cash) but are majors to inject liquidity through helping the revenue generating sectors and corporate,improve employment and to to make the GDP fall back on track"