Steps on MSMEs, NBFCs to help protect jobs, revive economy: Experts

New Delhi, May 13 () Channelising a major chunk of the stimulus package for vulnerable segments like micro, small and medium enterprises (MSMEs) and non-bank lenders will go a long way in protecting jobs and reviving country's economic growth, experts said on Wednesday.

Measures like emergency credit line of collateral-free Rs 3 lakh crore from banks and non-banking financial companies (NBFCs) and a Fund of Funds with a corpus of Rs 10,000 crore will help the sector protect jobs and revive country's economic growth which is impacted the lockdown imposed to contain the spread of COVID-19 disease, .

Experts also said that reduction of TDS/TCS rates by 25 per cent for non-salary payments to residents will leave more money in the hands of professionals and businesses.

Deloitte India Partner, Leader (Government and Public Sector) Arindam Guha said, "Channelising a significant part of the government financing support for vulnerable segments like MSMEs and NBFCs/ housing finance companies (HFCs) in the form of credit or investment guarantees to achieve a multiplier effect and also limit the actual outflow to the extent of default."

He said there is a clear focus on structural reforms and ease of doing business as it is evident from the measures around increasing the investment and turnover thresholds for MSMEs to enable them to grow bigger.

Guha also lauded steps like advising the state governments and Real Estate Regulatory Authorities to leverage force majeure provisions for providing an additional 6 months to real estate companies and exempting them from the need to obtain a fresh registration certificate or renegotiate contracts with their buyers.

Another significant measure was allowing contractors involved in highway/infrastructure construction to avail a standstill period of 6 months without any penalties, he added.

JLL CEO and Country Head (India) Ramesh Nair said that the fundamental of any economy is employment generation and the Government of India has made the right interventions by providing the requisite support to MSMEs.

The revitalisation of MSMEs will play a major role in the overall revival of the economy, he said adding, this in turn is expected to have a positive impact on the consumer sentiment, which has an important bearing on the real estate sector.

"These measures provided to MSMEs will also go a long way in protecting jobs and ensuring income continuity. This in turn will have a positive bearing for potential homebuyers especially in the affordable and mid segments," Nair said.

Snapdeal co-founder and CEO Kunal Bahl said these measures will help the MSMEs get back on their feet as additional collateral and guarantee-free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds are strong enablers.

KPMG in India Chairman and CEO Arun Kumar said MSMEs are critical for employment preservation and growth and firing up the MSME sector is the surest way to accelerate job creation.

"The finance minister's schemes announced today will provide relief for MSMEs that need immediate succour for their survival as well as help those enterprises that need a fillip to grow. Expanding the definition of MSMEs and introducing new thresholds based on turnover while elevating the investment ceilings for each segment are welcome," Kumar said.

The broad focus on enhancing liquidity is timely, including the measures for NBFCs, HFCs and MFIs (micro-finance institutions) and those for the power sector to ease the situation of distribution companies and cash-strapped independent power producers, he said adding that the measures to ease liquidity for lenders and businesses will make a tangible difference.

Finance Minister Nirmala Sitharaman on Wednesday announced about Rs 6 lakh crore package comprising Rs 3 lakh crore of collateral-free loans for small businesses and a Rs 30,000 crore lifeline to non-bank and housing finance companies as part of measures to help the economy tide over disruptions caused by the coronavirus lockdown.

The minister also announced cut in tax rate on non-salary payments by 25 per cent, support to companies to meet statutory liability on employees' retirement fund, provided a Rs 90,000 crore bailout to cash-starved electricity distribution companies and gave construction firms up to six more months to complete the government projects.

Shardul Amarchand Mangaldas & Co Partner Pooja Ramchandani said PF contribution is calculated at 12 per cent of basic wages + dearness allowance + retaining allowance.

"The announcement on provident fund reliefs is a positive one. The percentage of PF contribution has been reduced to 10 per cent. Prior to this, the rate of 10 per cent was applicable to establishments with less than 20 employees, sick industries, establishments where losses exceed networth, jute, beedi, brick, coir and gum industries," she said.

PwC India Chairman Shyamal Mukherjee said the profound measures to boost liquidity and enable MSMEs to take centre stage in making India self-reliant and play a significant role in the government's vision of Make in India.

Nangia Andersen LLP Director Sandeep Jhunjhunwala said the reduction of TDS and TCS rates on non-salaried payments by 25 per cent will set free additional cash in the hands of the vendors and help increase liquidity in the economy.

This reduction is estimated to release about Rs 50,000 crore in the hands of people, he said.

Consulting firm AKM Global tax Partner Amit Maheshwari said the TDS rate reduction will leave more money in the hands of deductees, especially professionals where the TDS rate is as high as 10 per cent.

Kotak Institutional Equities VP and Senior Economist Suvodeep Rakshit said the fiscal measures announced draws strongly upon the aim of providing liquidity and easing the functioning of key sectors. JD MKJ