The Centre and the RBI are exploring options for businesses hit hard by the second wave
The government and the Reserve Bank of India (RBI) are considering relief measures for businesses as India continues to battle the deadly second wave of the Covid-19 pandemic. Both are looking into the demands made by small businesses and other industries to provide some relief to them amid the Covid crisis, said a senior government official. “Some stress is building up in sectors and there are others like hospitality that have been hit the hardest, and we are aware of that,” the official said. The government and the RBI both are exploring how to tackle the current situation, and whether steps such as extending the Emergency Credit Line Guarantee Scheme (ECLGS) or introducing it in a new form or allowing further restructuring of MSME accounts need to be taken, the official said. They are also discussing whether some other steps need to be implemented. All options are being considered, and “it’s too early to come up with relief measures immediately even as there is pressure from industry”, the official said. Last year, the government had introduced a Rs 3-trillion collateral-free loan guarantee scheme for small businesses and widened it to include more sectors and categories of borrowers. The scheme can be availed of till June 30. The restructuring window for MSMEs, announced by the RBI in August last year, allowed lenders to extend repayment schedules for borrowers by up to two years. The window was open until March 2021. “The disruption caused in the past three weeks has been unprecedented, and measures are needed to support businesses, and the government is aware of that,” said another government official. Consumption is showing signs of dip even as goods and services tax (GST) collection for March, collected in April, was at a record high, the second official added.
Barring a few, leading high frequency indicators are also showing a decline, he said. Wholesale dispatches of automobiles have been impacted in April, with automakers reporting a decline compared to March. The Google Mobility Index shows that the mobility trend has not recovered to the pre-Covid baseline. For instance, for Delhi and Maharashtra, which have implemented complete lockdown, most parameters, barring visits to supermarkets and pharmacies, plummeted more than 50 per cent as on April 28. Electricity demand, vehicle registrations, and generation of GST e-way bills are seen slackening sequentially in April, revealing the impact of the recent surge in Covid-19 cases and localised restrictions. The government recently announced some steps such as extending timelines for certain tax compliances and providing 50-year interest-free loans to states to spur capital expenditure. It has also announced relaxation in payment of GST.
ON THE ANVIL
- Govt, RBI looking into demands made by MSMEs, industry
- Exploring if new form of Emergency Credit Line Guarantee Scheme or MSME restructuring scheme extension needed
- Measures needed as stress building up in several sectors
- Relief measures may not be announced immediately