The first Union Cabinet meeting chaired by the Prime Minister Narendra Modi after he entered 2nd year of his tenure held here today and gave nod to several historic decisions believed to yield a transformative impact on the lives of India’s hardworking farmers, MSME sector and those working as street vendors.
Helping hand to MSMEs
Micro, Small and Medium Enterprises popularly called as MSMEs are the backbone of Indian economy. Under this package, the MSME sector has not only been given substantial allocation benefitting 6 crore units but has also been accorded priority in the implementation of the measures to revive the economy.
Some of these announcements are in continuation to what the Union Finance Minister Nirmala Sitharaman had announced the 20 Lakh Crore package earlier as part of Aatma Nirbhar Bharath Abhiyan scheme. Today, the Government of India has laid down the road map for effective implementation of other announcements too. These include:
- Upward revision of MSME Definition. This is yet another step towards ease of doing business. This will help in attracting investments and creating more jobs in the MSME sector;
- Proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs has been formally approved by the cabinet today. This will benefit 2 lakh stressed MSMEs.
- Proposal for equity infusion of Rs. 50,000 crores for MSMEs through fund of funds has also been approved by the Cabinet today. This will establish a framework to help MSMEs in managing the debt-equity ratio and in their capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.
Further upward revision of MSME definition:
The Government of India today decided for further upward revision of MSME definition. In the package announcement, the definition of micro-manufacturing and services unit was increased to Rs. 1 crore of investment and Rs. 5 crores of turnover. The limit of the small unit was increased to Rs. 10 crores of investment and Rs 50 crore of turnover.
Similarly, the limit of a medium unit was increased to Rs 20 crore of investment and Rs. 100 crore of turnover. It may be noted that this revision was done after 14 years since the MSME Development Act came into existence in 2006. After the package announcement on May 13, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards. Keeping in mind these representations, the Prime Minister decided to further increase the limit for medium manufacturing and service units. Now it will be Rs. 50 crore of investment and Rs. 250 crore of turnover.
It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium.
Supporting our hardworking street vendors
The Ministry of Housing and Urban Affairs has launched a Special Micro-Credit Facility Scheme – PM SVANidhi (PM स्वनिधि ) – PM Street Vendor’s AtmaNirbharNidhi, for providing affordable loans to street vendors. This scheme will go a long way in enabling them to resume work and earn livelihoods.
Over 50 lakh people, including vendors, hawkers, Telawalas, Rehriwala, Theliphadwala etc. in different areas and contexts are likely to benefit from this scheme. The goods supplied by them range from vegetables, fruits, ready-to-eat street foods, tea, Pakodas, bread, eggs, textiles, apparel, footwear, artisan products, books, stationaries etc. The services include barbershops, cobblers, pan shops, laundry services etc.
The Government of India is sensitive to the problems they have faced in the wake of the COVID-19 crisis. In such a time, there is an urgent need to provide affordable credit to them to ensure their business gets a boost. Urban Local Bodies will play a pivotal role in the implementation of the scheme. This scheme is special due to a number of reasons:
1- A historic first:
This is for the first time in India’s history that street vendors from peri-urban and rural areas have become beneficiaries of an urban livelihood programme.
The vendors can avail a working capital loan of up to Rs. 10,000, which is repayable in monthly instalments in the tenure of one year. On timely/ early repayment of the loan, an interest subsidy @ 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on a six-monthly basis. There will be no penalty on early repayment of the loan.
The scheme provides for escalation of the credit limit on timely/ early repayment of the loan to help the vendor achieve his ambition of going up on the economic ladder.
It is for the first time that MFIs/ NBFCs/ SHG Banks have been allowed in a scheme for the urban poor due to their ground-level presence and proximity to the urban poor including the street vendors.
2- Harnessing technology for empowerment:
In line with the Government’s vision of leveraging technology to ensure effective delivery and transparency, a digital platform with a web portal/ mobile app is being developed to administer the scheme with an end-to-end solution. The IT platform will also help in integrating the vendors into the formal financial system. This platform will integrate the web portal/ mobile app with UdyamiMitra portal of SIDBI for credit management and PAiSA portal of MoHUA to administer interest subsidy automatically.
3- Encouraging digital transactions:
The scheme incentivises digital transactions by the street vendors through monthly cashback.
4- Focus on capacity building:
MoHUA in collaboration with State Governments, State Missions of DAY-NULM, ULBs, SIDBI, CGTMSE, NPCI and Digital Payment Aggregators will also launch a capacity building and financial literacy programme of all the stakeholders and IEC activities throughout the country during the month of June and loaning will commence in the month of July.
Igniting the spirit of Jai Kisan:
For the Kharif season 2020-21, the government has kept its promise of fixing the MSP at a level of at least 1.5 times the cost of production. Today, the MSP of 14 crops for the Kharif season 2020-21 has been announced, based on the recommendation of CACP. The return over cost for theses 14 crops ranges from 50% to 83%.
The Government of India has also decided to extend repayment date up to August 31, 2020, for all Short-Term loans up to Rs.3 lakh advanced for agriculture and allied activities by banks. Farmers will also get the benefit of interest subvention and prompt repayment incentive.
The agricultural short-term loan due between March 1, 2020, and August 31, 2020, will continue to get the benefit of 2% Interest Subvention (IS) to Banks and 3% Prompt Repayment Incentive (PRI) to farmers.
Government of India’s decision of providing such loans to farmers through banks @ 7% per annum, with 2% per annum interest subvention to banks and 3% additional benefit on timely repayment by farmers thus provides loans up to Rs.3 lakh at 4% per annum interest.
Interest Subvention Scheme (ISS) was started to provide concessional short-term crop loans including loans availed through Kisan Credit Cards to the farmers. In the last few weeks, many farmers are not able to travel to bank branches for payment of their short-term crop loan dues. Hence the cabinet decision would help the crores of farmers.
Caring for the poor the Government’s top focus:
The poor and vulnerable are at the top of the priorities of the Government led by the Prime Minister. During the Coronavirus pandemic, right from the day of announcement of the lockdown, the government has been sensitive to the needs of the poorest of the poor. This was seen in the announcement of the Pradhan MantriGaribKalyanYojana package on 26th of March 2020, within just two days of the start of lockdown.
From ensuring coverage of around 80 crore people with food security to direct cash transfers into the bank accounts of 20 crore women, from putting money into the hands of senior citizens, poor widows and poor Divyangs to front-loading of the PM-KISAN instalment to crores of farmers, steps were announced. These covered a wide range of vulnerable sections who would have borne the brunt of the lockdown if not for the immediate intervention of the government. Moreover, these were not mere announcements. Within days, assistance reached crores of people directly, either in cash or kind.
As part of the Atmanirbhar Bharat initiative, One Nation One Ration card, free food grains even for those without ration cards, a new affordable rental scheme for their housing and many more measures have been announced for the welfare of the migrant labourers.
Massive reforms were announced for farmer welfare, freeing farmers from the chains that bound them and giving their income prospects a significant boost. Along with this, more investments into farm infrastructure were proposed. Allied activities such as fisheries too received a financial package.