The scheme may be extended into the next fiscal given the covid situation
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NEW DELHI :
The government may extend the ₹4.5 trillion sovereign-guaranteed credit facility for small businesses to the next fiscal year as the pandemic is not over, and the scheme has been successful in providing liquidity support to more than 10 million enterprises, protecting about 54.5 million jobs, two people aware of the development said.
The Emergency Credit Line Guarantee Scheme (ECLGS), which ends on 31 March 2022, could be extended in the next financial year as several small firms, particularly in the services sector, may still need such liquidity support following the emergence of new covid variants, the people cited above said, requesting anonymity.
“The extension of ECLGS with certain modifications is under consideration, and an announcement to this effect is possible in the budget," one of them said, adding that a corpus of about ₹1.6 trillion is still available under the scheme.
ECLGS is one of the key components of the ₹20 trillion economic stimulus package under the ‘Atmanirbhar Bharat Abhiyan’ announced in May last year that offers additional working capital finance in the form of a term loan to MSMEs and professionals. Initially, its corpus was ₹3 trillion, which was raised to ₹4.5 trillion in June after the second covid wave when finance minister Nirmala Sitharaman announced a fourth stimulus package worth ₹6.29 trillion.
The second person said that under ECLGS, loans worth over ₹2.82 trillion had been sanctioned to about 11.5 million borrowers so far, and ₹2.28 trillion has already been disbursed, benefiting 9.52 million units. “The scheme has been able to provide much-needed liquidity support to pandemic-hit small units. Although the economy has bounced back, several such firms, particularly those in the service sector, still need such credit support as the potential threat of new variants cannot be ruled out completely," this person said.
The covid-19 outbreak last year and a consequent 68-day nationwide lockdown had a devastating impact on the economy. India’s gross domestic product contracted in the first two quarters of FY21—24.4% in the first three months and 7.4% in the second quarter. Thereafter, the economy rebounded on the back of the ₹20 trillion stimulus package, and several policy reforms announced since March 2020. The third quarter saw a positive 0.5% growth, followed by 1.6% expansion in the fourth quarter ended 31 March. The Indian economy started the current fiscal year with a record 20.1% expansion in the first quarter and 8.4% in the second, signalling a strong revival in business activities.