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Union Finance Minister Nirmala Sitharaman.
Union Finance Minister Nirmala Sitharaman.

MSME reform announcements seen as high on optics, outreach

  • While sections have welcomed the stimulus for MSMEs, the Opposition says spending is inadequate
  • The government has backed MSMEs in keeping with its push for going local

NEW DELHI : The National Democratic Alliance (NDA), which is in power at the Centre, reached out on Wednesday to its core support base with the government announcing a slew of reform measures, targeted at micro, small and medium enterprises (MSMEs) and giving relief to the salaried class to restore demand and increase their purchasing power.

The move was high on optics with Prime Minister Narendra Modi, in his address to the nation on Tuesday, stressing on the need to focus on local, while going global, as homegrown enterprises helped India face the covid-19 crisis and the subsequent 50-day nationwide lockdown.

Finance minister Nirmala Sitharaman on Wednesday announced an outreach package for MSMEs, broadening their definition, extending investment limits, and clubbing manufacturing and services enterprises under small businesses, besides offering collateral-free automatic loans and equity support to stressed enterprises.

A day after Modi announced a 20 trillion economic package to give relief to the poor, small industries, the middle class, farmers and migrant labourers, the finance minister held a press conference to announce the first tranche of reforms to revive the economy.

The Centre tweaked direct tax rules, including extension of due dates for filing returns and audits. A special liquidity scheme and partial credit guarantee scheme for non-banking financial companies (NBFCs) will help ramp up confidence in the market, it said.

“The Prime Minister has talked about all sections, be it MSMEs, salaried class or labourers, and the announcements made by the government are along similar lines. There is growing tension between different sections of people and there is a deliberate attempt by the government to minimise this tension," said Sanjay Kumar, director, Lokniti, Centre for the Study of Developing Societies (CSDS).

“The government realises that while the degree of suffering may differ, all sections of people have suffered because of the economic challenges. The salaried class and MSMEs are part of the core voter base of the BJP, but the government has also tried to reach out to other backward classes, Dalit, tribals through its financial assistance," Kumar said.

Amid concerns raised by experts and opposition parties over the socioeconomic fallout of the pandemic, the Union government is looking to address issues, including joblessness, access to resources for the poor, revival of MSMEs and relief to the salaried class.“The Prime Minister has often spoken about the importance of local, but India cannot become protectionist. We have to strengthen our MSMEs. It is unfair to say that MSMEs and traders are voters of BJP. The real voters are those poor and financially weaker sections who have benefited from government programmes," said Bharatiya Janata Party spokesperson Gopal Agarwal.

The Opposition, however, expressed disappointment over the announcements, saying it did not address issues faced by the “lakhs of poor, hungry and devastated migrant workers who have walked" and deals a blow to them.

“This government is a prisoner of its own ignorance and fears. It must spend more, but it is not willing to do so. The government must borrow more, but it is not willing to do so. It must allow states to borrow more and spend more, but it is not willing to do so," senior Congress leader and former Union minister P. Chidambaram said in a press conference on Wednesday.

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