Views on FM's relief package announcement by industry experts

Positive for consumers as a theme but mostly low-priced products. Rs1.7 lakh crore is about 0.8% of GDP, Sujan Hajra said.

Mar 26, 2020 10:03 IST India Infoline News Service

Nirmala Sitharaman
Rajnish Kumar, Chairman, SBI and Chairman IBA

“The relief package announced by the Honourable FM today is timely, well-intentioned and has combined both cash transfers and primary food requirements for the marginalised sections of society for the next 3 months. The global economy is going through unprecedented times and India is no exception. The nationwide lockdown was rightly enforced for India to stay ahead of the curve in fighting the global pandemic. Today’s package will now impart a definite direction to India’s fight against the epidemic. Overall it’s a very well defined package reinforcing government’s intent that no one should be deprived of basic facilities in today’s stressed times. We are hopeful of more calibrated responses in coming weeks as the impact of pandemic unfolds.”

Aditi Nayar, Principal Economist, ICRA

The announcements made by the FM to provide relief during these unprecedented times are welcome, especially the provision of additional food, which will ensure food security, free LPG, and the upfronting of various payments, such as the PM Kisan and pension entitlements. However, the fresh announcements related to cash transfers appear to be relatively modest at this stage. Accordingly, we now expect the impact of social distancing and the lockdowns to limit GDP growth to 2.4% in Q4 FY2020 and a marginal 0.5% in Q1 FY2021, despite the support from agriculture and government spending. As a result, we expect the annual GDP growth to ease from 4.4% in FY2020 to 4.2% in FY2021.

Once the lockdown conditions are lifted, we expect different sectors to return to near-normalcy with a varied timeline. Even though volume growth may bounce back rapidly in some sectors to replenish the depleted inventories, supply chains may take some time to normalise. Moreover, profitability is likely to be squeezed, which would weigh upon GDP and GVA growth.

I. V. Subramaniam – MD & CIO Quantum Advisors & Director-Quantum AMC

FM announced slew of measures for the people at the bottom of the pyramid, to help them tide over the disruptions of the COVID 19 lockout. Measures centred on up fronting of payments in certain schemes (PM Kisan) & enhancing benefits in others (UJJWALA, MNREGA Jan-dhan). The free food & cash dole-outs were required & will definitely help the poor. However, there was not much there for the markets, FMCG Companies might benefit to certain extent as poor have extra cash to spend. Surprisingly, steps to help the businesses were conspicuous by their absence. Some of the labour intensive sectors like tourism & aviation have been significantly impacted due to COVID 19 related disruption & could see massive layoffs if government does not take steps to mitigate the impact. Globally, most government stimulus has focussed on helping the small businesses & easing the financial system to keep the economic activity going & avoid mass level unemployment. We expect the government to address the issues of the businesses in the second round of measures. Preferably, sooner than later. 

Honeyy Katiyal, Founder, Investors Clinic

"We welcome FM’s announcement on the slew of measures announced through Gareeb Kalyan Scheme for the underprivileged and daily labourers. This was a much needed step to stabilize the economic sentiments, after the 21 day lockdown announcement by the PM.
Though the lockdown will impact revenue stream and has already started hitting hard the bottomlines of various companies across industries; the lockdown is a much needed step as social distancing forms the core to prevent COVID-19 from becoming a pandemic in the country. Directing State governments  to use welfare fund for building and construction labourers with infusion of INR 31,000 crore will help boost the sentiments of real estate developers and the overall fraternity. Construction labourers form a core for the real estate sector and their sentiments impact the over all markets sentiments of the industry."

Suman Chowdhury, President – Ratings at Acuité Ratings & Research:

“The announcement of the Rs1.7 lakh cr stimulus package under Pradhan Mantri Gareeb Kalyan (PMGK) is the right step to address the needs of the vulnerable segments of the population who will be severely impacted by the ongoing lockdown and economic disruption triggered by Covid-19. The government has tried to ensure food security for the poor through the additional free supply of cereals via PDS for the next 3 months which should benefit a large section of the domestic population. This apart, sizeable cash infusion is envisaged through DBT in Jan Dhan accounts for specific segments of the vulnerable population – mainly farmers, rural daily wage workers, construction workers, senior citizens and women in the low income groups.

One significant initiative is the decision to pay the statutory PF dues for those SMEs who have up to 100 employees with average monthly salaries less than Rs. 15,000. While the actual number of small enterprises that will be able to avail this scheme is not clear at this point, it is surely a significant relief for the SME sector. This along with the government’s decision to permit a delay in GST payments for 3 months and the announcement of several large banks to advance temporary credit line to SMEs, is likely to offset a part of the heightened liquidity pressures in the sector. The modification of the EPFO regulations to facilitate a one-time non-refundable withdrawal of PF balances up to 3 months of salary or 75% of the balances is a prudent move to support the short term cash flow problems for the mid-income population; however, the implementation of this scheme and disbursement of funds by EPFO in a lockdown scenario may pose a challenge.

The additional expenditure of Rs. 1.7 Lakh Cr will clearly intensify pressures on the fiscal deficit which can climb above 4.0% in FY21. However, Acuité continues to believe that the repair and revival of the economy through public expenditure is a priority in today’s scenario where the slowdown in demand has been further hit by Covid-19. We also are of the view that over and above the current package, special regulatory dispensation for NPA recognition or loan restructuring may need to be considered to address the challenges in the financial sector arising from the likely spurt in delinquencies from all asset classes in the short term”.

Prashant Solomon, MD, Chintels India and Hon. Treasurer for CREDAI NCR

"The Hon’ble Finance Minister today announced that state governments will use welfare funds worth 31,000 crore INR to provide relief to building and construction labourers, boosting sentiment in the real estate sector. About 3.35 crore registered workers facing economic difficulties during the lockdown will benefit from this fund. While we appreciate this move, the sector also requires some relief for businesses, possibly in the form of tax benefits or relaxations on payments of EMI, loans or government fees. The economic situation will not improve unless relief is provided to both workers and businesses."

Dr Niranjan Hiranandani, President – Assocham & NAREDCO

“At the time when nation is struck with natural disaster and grappling with Pandemic crisis, Govt of India announces Rs 1.7 lakh crore relief packages for the poor and marginalised segments of the society. These initiative aims to provide a buffer & facilitate the basic needs of economically weak people who have no other means of being shielded from the crisis."

The widely covered unorganized sectors including agrarian and Construction laborers, these moves will bring big relief to all the concerned stakeholders. It aims at resolving primary problems of the poor. Similarly, for the organized sector, EPF contribution by the Government for some segments of workers will play an important role in ensuring that the bottom of the pyramid is able to handle the challenges of the lockdown.

While welcoming these moves, one hopes that other segments of society, who are also looking forward to measures such as EMI waivers as also extension of loan scheme tenures, among others economic package shall be on wait and watch mode. The Finance Minister deserves praise for having announced the relief measures, responding to the challenge of the lockdown following the COVID-19 pandemic.”

Mayank Bathwal, CEO, Aditya Birla Health Insurance
“In the past few years, the world has faced outbreaks of dreaded viruses such as Ebola, Zika, Nipah, and now Corona. A health insurance policy covers all infections, and Corona is one such infection. Coverage will be available in all products that offer hospitalization covers. Hence, all covers such as in-patient treatment, pre-hospitalization, post-hospitalization and ambulance cover that your health policy offers will be available to you, to fight against this pandemic.”
1. Discussion around impact of covid-19
The coronavirus (COVID-19) outbreak has brought into focus the necessity for a global health system. In order to provide need-based health insurance coverage, insurers are planning to introduce products for various specific diseases, including vector borne diseases.
2. And the trends they've seen since the outbreak
Insurers have seen a slight jump in inquiries on health insurance policies, with customers looking for protection against Coronavirus that has already infected a lot of people around the world.
3. Any products/services in pipeline
Coronavirus has increased anxiety in people’s minds due to the nature of the ailment and the lack of availability of proper medication. We all have a role and responsibility to contain the virus. Care and prevention is of utmost importance. At the moment, all our indemnity products that offer hospitalization covers, in-patient treatment, pre-hospitalization, post-hospitalization and ambulance cover are available for all our customers, to fight against this pandemic. Simultaneously, we are planning to work on an exclusive product for coronavirus.

Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers
“FM’s announcements are focused mostly towards rural poor. Positive for consumers as a theme but mostly low-priced products. Rs1.7 lakh crore is about 0.8% of GDP. Collapse of demand, as was being feared by many, looks unlikely. So the period of lockdown may not be extended. These measures, if effectively and quickly implemented, would make the total shutdown more complete. This is the biggest positive for listed companies.”

Manjula Muthukrishnan, Managing Director – India, Avalara Technologies Private Limited
“COVID-19 has created economic uncertainty globally as countries continue to suffer as the outbreak spreads. One strategy which Avalara can see being used across countries is the utilization of tax-related measures as a flexible and effective response to the economic slowdown. In some nations, the tax-related relaxations involve tax filing and payment extensions and even temporary rate reductions. Our Union Finance Minister Nirmala Sitharaman assured that an economic package with policy reforms would be coming soon. But in the meantime, the financial and regulatory compliance relaxations for individuals and companies declared is a definite welcome move in this rather gloomy market scenario. All the measures announced, including the extension of income tax returns and GST returns deadlines, declaring customs as an essential service, are absolutely necessary. A deferral in several tax filing deadlines has been the need of the hour given that we are physically in a situation where taxpayers cannot fulfil these deadlines, let alone meet with their tax consultants or manage supply chains on a larger scale. Many taxpayers were expecting relaxations around payments of tax, but that has not come through. The primary compliance requirements have been pushed till the end of June, and, in many cases, interests and penalties for late filing have been waived. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties. The Treasury Department of the United States, on March 20, moved Tax Day from April 15 to July 15. EU Commission has suggested countries to provide VAT payment holidays and act in unison. It has also relaxed the state-aid rules, which would permit VAT measures benefiting only specific businesses or sectors. Our government officials should also consider drawing up a list of acceptable arrangements for small businesses and a select group of industries like hospitality, tourism, transport, aviation.”

Sanjoy K Roy, Founder and Managing Director, Teamwork Arts and President - EEMA

"I welcome the much needed package for the poorest of the poor and I’m sure it will provide some respite from these difficult ones. We have also asked the government to keep the event and experiential industry in mind and highlighted the need for immediate tax refunds to be released and for all owed amounts by the Central and State government to the sector to be paid in full. We have also requested loans for MSMEs to be  provided on relaxed collateral terms and a restructuring of GST. Support for salary payments is also required."

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