Ms. Meghna Suryakumar, Co-Founder & CEO Crediwatch welcomed the relief measures announced by the finance minister.
“While at the outset, several relief measures by the Finance Minister look promising, we believe their success will lie in implementation. In our view, some of the measures which should be welcomed by small businesses in India are –
(a) Global tenders barred from procurements up to Rs 200 crores – the Government’s e-procurement sites have typically been flooded by large foreign players who bring unfair advantage in terms of pricing and size. MSMEs working as ancillary units (e.g. autos, infrastructure) lose the bidding on smaller deals. The move should improve the competitiveness of Indian MSMEs on government contracts. It should also see an increase in registration by MSMEs and Mid-Market businesses on such platforms.
(b) New definition for MSMEs – This has been a long pending demand from multiple industry associations. While MSMEs have tried to remain within a particular size in order to benefit from the MSME tag in the past, the new definition will promote them into growing further in size and scale.
(c) Collateral-free automatic loans – While this extends the previous loan moratorium benefits, the new terms should benefit as many as 45 lac businesses and help with working capital requirements in coming days. We believe, setting the threshold for eligibility (Rs 25 cr outstanding and Rs 100 cr turnover) is helpful but it is yet to be seen whether public sector banks will underwrite such unsecured loans at a faster pace on the back of these terms. The real-need of the hour is to move to cash-flow based lending.
(d) Equity & Subordinate Debt infusion – The need for Long term capital will increase three months from now as businesses grapple with uncertain demand and high fixed costs. In our view, the Rs 70,000 crore facility should assist stressed MSMEs in raising funds as the tide turns.
While a technology-driven approach may pave a way to lower recurring costs in the future, the FM’s announcements today should ease the stress of a large number of promoters, partnership firms and small private limited entities. Coupled with lower TDS and TCS rates, the cash-in-hand should be prudently used by these MSMEs in the months to come.”
