The Indian government has pledged to spend US$265 billion, including US$40 billion in collateral-free loans to small businesses, to boost liquidity and help the economy weather the fallout of the COVID-19 pandemic.
The loans would benefit up to 4.5 million small businesses, Indian Minister of Finance Nirmala Sitharaman said in New Delhi yesterday.
“Essentially this is to spur growth and to build a very self-reliant India,” Sitharaman said. “It addresses ease of doing business, compliance and due diligence, and the intention is also to build local brands.”
Photo: Reuters
Indian Prime Minister Narendra Modi on Tuesday said that his government would spend an amount equivalent to 10 percent of the nation’s GDP to help the economy get back on its feet after weeks of stay-at-home restrictions to beat the pandemic.
The resultant halt to nonessential consumption set up Asia’s third-largest economy for its first annual contraction in four decades, as businesses collapsed and jobs were lost.
An estimated 122 million people lost their jobs last month, while consumer demand has evaporated.
Modi’s spending plan includes measures already unveiled by the government and by the Reserve Bank of India, such as the provision of cheap cash to banks and a reduction in its cash reserve ratio.
The details of the package are to be shared in tranches, Sitharaman said, adding that yesterday’s announcement covered 15 different measures, including six pertaining to small businesses, and that more would be announced over the next few days.
As part of the plan, small businesses would be eligible to borrow collateral-free automatic loans for a four-year tenor with a 12-month freeze on principal repayments. The loans would be guaranteed by the government.
“This economic package will be a crucial link in the creation of a self-reliant India,” Modi said. “It will focus on areas like land, labor, liquidity and law.”
Modi has come under criticism for the pain inflicted on India’s poor due to the sustained lockdown since the end of March.
In the past few days, the movement of millions of migrant workers from the cities where they had jobs to their homes in rural villages has dominated the news.
Companies have been urging the government for weeks to increase support measures.
Some restrictions were eased on April 20 to allow farmers and industries to resume operations in rural areas and in districts free of infection.
Still, companies are facing difficulties reopening factories because of travel restrictions, conflicting rules, broken supply chains and a shortage of workers.
The country has started running special trains to take stranded workers to their homes. Indian Railways also partially resumed passenger train operations from Tuesday, nearly two months after the services were stopped.
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