Andalib Akhter

The corporate sector has welcomed the measures announced by finance minister  Nirmala Sitharaman to provide relief to various sectors affected by the COVID-19 pandemic, saying the focus is ‘very well placed.’

Sitharaman had announced a package17 measures to the tune of Rs. 6,28,993 crore to boost the business and industry. These included two measures announced earlier, i.e. the additional Subsidy for DAP & P&K fertilizers, and extension of Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) from May to November, 2021..

Sanjiv Mehta, senior Vice-President, FICCI, says, “While some of the existing relief measures have been extended, the focus of the new measures is very well placed. The emphasis laid on the Covid-affected sectors in the latest relief package is laudable and was the need of the hour.”

The Rs 1.1 lakh crore credit guarantee scheme for COVID affected sectors with stress on the health sector is a great step forward. “The focus on scaling up health infrastructure in areas other than the metropolitan cities should ensure timely availability of medical aid in the smaller cities. Moreover, the additional allocation of about Rs 23,220 crore for enhancing pediatric care facilities is equally important. These measures are timely, and their seamless implementation should help us prepare better to face the subsequent waves of the pandemic," said Mehta.

Welcoming the direct support offered to the tourism and travel industry, Mehta said the sector was severely hit in the first two waves of the pandemic and continues to face the uncertainty.

Mehta said, “The enhancement of the very successfu Emergency Credit line Guarantee scheme (ECLGS) to Rs 4.5 lakh crore from Rs 3.0 lakh crore will ensure sufficient availability of liquidity on a continuous for businesses. We look forward to the sector-wise details under the scheme which the Minister said will be announced soon.  Also, the announcement of the new credit guarantee scheme for MFIs is expected to give an impetus to fresh lending directly benefiting about 25 lakh people."

TV Narendran, President CII, said the measures announced with a special focus on health and tourism will fetch results.” The liquidity boosting measures to keep the enterprises afloat in the aftermath of COVID 2.0 in the form of extending loan guarantees to the healthcare, tourism sectors and the small borrowers, in addition to increasing the scope of ECLGS by Rs 1.5 lakh crore are very welcome steps ”.

Narendran said the ECLGS Scheme was a very successful scheme. The extension of its scope and coverage are likely to provide cash flow of the stressed sectors.

“Tourism sector is one of the most impacted sectors; the second wave has only exacerbated the situation. With a significant contribution to both GDP and employment, the economic relief package for the tourism sector will usher in the much-needed liquidity and help revive this employment intensive sector,” said Narendran.

The measure of offering working capital loans with a 100% guarantee to more than 11,000 registered tourist guides and travel and tourism stakeholders will help save livelihoods, revive the sector and mitigate further closures and also create jobs.

Free Visas for the first 5 lakh tourists will lead to an influx of foreign tourists and   help in promoting tourism after a massive disruption.

However some experts have said that the new loan guarantees may provide temporary relief but would not be sufficient to boost economic growth.

"Most of the financial support is still below the line and in the form of loan guarantees, and not direct stimulus," said Madhavi Arora, lead economist, Emkay Global Financial Services.

She said that given the limited efficacy of monetary easing, continued countercyclical fiscal policy support - and avoiding a premature consolidation - remained crucial.

Aditi Nayar, the chief economist at ICRA, the Indian arm of rating agency Moody's, said the new measures would have an impact of around 0.6 trillion rupees on government finances and their success would hinge on offtake, or actual spending.

“Finance Minister’s new deal as Covid-19 relief is based on three prongs: More guarantees by the government to improve the flow of credit to vulnerable and important sectors; direct action when it comes to health; and support for the poor and farming community. These measures are timely and will help alleviate the hardships of the concerned sectors. But these again are supply-side measures and not on the demand side. A large part of the package will work only in the medium-term” writes Madan Sabnavis chief economist at CARE Ratings.