Even as news trickled out that the Indian government was working on a comprehensive financial package, there was a sense of uncertainty following certain statements by senior government officials. Just a day before Secretary Giridhar Aramane revealed that a “comprehensive package” was being worked out, Chief Economic Advisor KV Subramanian cautioned industry against demanding an economic stimulus similar to that rolled out by other countries. Subramanian’s comments come against the backdrop of increasing recognition of the scale of the problem faced by Indian MSMEs. Union Minister Nitin Gadkari said the sector was “on the brink” and exhorted various stakeholders to clear dues of MSMEs at the earliest possible. The continued economic pain of the lockdown has increased calls by MSMEs for an economic stimulus to assist with their dire needs for capital to pay wages and keep businesses running. The Indian government is clearly trying to find the right balance for a large financial package that does not incur huge costs to the economy. One can only hope that this financial aid arrives in time, before the Indian economy lapses into complete recession.
Trade Update
8TH MAY
# 68
The government is working on a comprehensive financial package not only for MSMEs but for all sectors of the economy, a top official said on 7th may. “The Government of India, Prime Minister’s Office and the Department of Economic Affairs are already working on a package, which includes not only the MSMEs but also the entire industry. All sectors of the economy are being taken care of by a comprehensive package, being worked out in the government,” said Giridhar Aramane, Secretary in the Ministry of Road Transport and Highways.
Chief Economic Advisor (CEA) KV Subramanian has cautioned against the demands of a stimulus similar to developed nations saying that it would come at a huge cost to the economy. “There is no free lunch,” Subramanian told The Economic Times. Monetizing the fiscal deficit will have an impact on macro fundamentals and the economy would incur significant costs, Subramanian added. Making comparisons with stimulus packages provided by the governments in other countries is invalid, he said.
The government on 6th May banned exports of alcohol-based hand sanitizers to boost their availability in the domestic market amid the coronavirus pandemic. “Alcohol-based hand sanitizers are prohibited for exports,” the Directorate General of Foreign Trade (DGFT) said in a notification. Sanitizers are used as disinfectant to prevent the spread of the deadly virus.
MSME Minister Nitin Gadkari on 7th May said that the government is expecting restructuring of 25 lakh MSME loan accounts by December this year up from 6 lakh till 31st March 31 – an over 300% increase. The minister added that the government has made some decisions to help MSMEs grow in the post-COVID scenario such as increasing their working capital limit by 20%. “We have also deferred (loan) repayments for three months. We have told many things to the government like ensuring immediate income tax and GST returns for (bringing) liquidity into MSMEs. We have also asked for the dues stuck in NHAI and other government departments to be released soon. Unless there is liquidity, the economic wheel won’t move,” Gadkari told the members of Indore Management Association in a webinar.
A six-digit code that identifies over 5,000 goods worldwide has emerged as a roadblock stalling exports of cloth masks from India even as exporters have been flooded with queries for colored and designer masks. India has banned export of masks that fall under a specific tariff code. The Smriti Irani-led textiles ministry has initiated talks with the commerce ministry on how to address the issue. “The issue is all masks have the same HSN code. N-95 and surgical masks are required for COVID-19.The issue is now being examined,” said an official in the know of the details.
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