CA Radheshyam Sharma

Date : 17th May, 2020


The Honourable Prime Minister
Government of India South Block,
Raisina Hill, New Delhi, Delhi 110011

Respected Sir

Sub: Request for modification in Relief Package to MSMEs and other industries or Workers or farmers

We all 130 cr citizen of the country have faith on you which you must have seen on day of Janata curfew where even single person was not on road and in future also we are there with you and we thank you for considering and helping all the sections of the country starting from Rural and Urban Poor , Workers, MSMEs , NBFC and general Public for moratorium of all the loans by announcing a 20 crore stimulus or relief package for revival / survival of all of us. We were very happy on 12th May, 2020 when you had announced this relief or stimulus package of 20 lacs Cores but we have shocked that in real term it is not a relief package but same is reform package which is also need of country for their growth, respected sir though all of you are more learned mentors of us but we being small persons also understand the meaning of Stimulus or/ relief Package and its need of it. After analysis of 5 trenches of this packages being explained by our hon. Finance ministers, we confused that whether we have knowledge of economy or not. Respected sir it is my humble request that our faith in you must be intact for which entire policy of government should be transparent and should not be painted with political color .you are prime minister of entire country even for people who may not be voted for you but as prime minister all of us have faith and hope this will continue forever.

Respected Sir we have in-depth knowledge of MSMEs and Economy also based on which we can say that team which has prepared this Reform package is not having knowledge of ground realty of MSMEs and same is being prepared considering theoretical knowledge of economics, because condition of MSMEs in India is very crucial and most of these units are at verge of closure and need immediate support and any future support with additional burden of loan they cannot be revived or survived because in medical language it is said that when we need oxygen and immediate ventilator then even best medicine which may cure disease in future cannot save patient hence most of MSMEs need ventilator i.e hard core finance support in term of Interest waiver, Reimbursement of wages, reduction in power tariff, waiver of electricity duty, relaxation in provisions of ESIC,PF , Gratuity, Leave Encashment etc.

In your package you had resolved the problem liquidity by providing additional loan to most of industries or farmers but to the extent of my knowledge these additional loans without increasing demands of products will be cancer for the banks or other lender financial institution because even before Coronavirus pandemic most of MSMEs were struggling in regular payment of their debts. No doubt for additional loan of 20 percent  you had given moratorium for repayment of principal and interest but they have to pay existing debts after three months which they are not in position to pay hence there are chance that most of these borrower may default after three months which will be more dangerous for banksas compare to giving interest  waiver and lower Rate of interest for 6 months because these waiver and reduction in rate of interest can be recovered by way of interest and charges being levied in future if these MSMEs survives but due to higher burden there is risk for loosing of entire outstanding including these additional 20 percent. We suggest that these additional can be reduced to 15 percent and balance 5 percent can be given as interest waiver for period of 6 months along with interest subvention of balance 6 Months.

We reproduce the Gist of your address to nation on Covid Treasury and Opportunity from it and since Coronavirus and large lockdown has badly affected the Indian Economy especially MSMEs and Small persons and as measure of rival and relief you had announced a Stimulus or relief package of 20 lac Crores details of described in this request letter. In your address to national you have emphasised on self-Reliant by grabbing opportunity of foreign company to establish manufacturing units in India but to the extent my knowledge these opportunity can used by financial healthy persons as weak persons are not in position to grab any opportunity on account of higher global completion hence first we have to make MSMEs as financially sound as capable to these opportunity.  

Addressing the nation on the coronavirus pandemic, you had expressed that India’s effort in dealing with the pandemic, saying the country has turned the tragedy into an opportunity. “Before the outbreak, we didn’t have PPE or enough N95 masks, now we have at least 2 lakh of protective equipment’s, you have also said that it should not be just our dream but also our responsibility to ensure that the 21st century belongs to India. India didn’t produce any PPE before COVID-19 crisis and manufactured very few N-95 masks, now we are producing 2 lakh of each: India’s self-reliance addresses concerns about world’s happiness, cooperation and peace: Medicines supplied by India have infused new hopes in the world which is fighting battle of life and death: When India talks of self-reliance, its focus is not on a capital-centric world order, but on the welfare of humanity at large, based on Vasudhaiva Kutumbakam., When India talks of self-dependence, its focus is not on a capital-centric world order, but on the welfare of humanity at large, based on Vasudhaiva Kutumbakam.

You have also said that this crisis is neither heard of not seen before, it’s unprecedented… we need abide by the rules of engagement in this war against coronavirus. We need to take cover as well as March forward in our fight. Our resolution will be greater than the magnitude of this crisisAs a nation, we are standing are standing at a crucial crossroads. This crisis also presents us with an opportunity. We have changed the disaster into an opportunity.  You had listed five pillars for a self-reliant India i.e Economy, Infrastructure. Tech-driven System, Vibrant Demography and Demand. And we all Indian citizens are there with to fight with with this unknown enemy and make india as super power.

You had announced Rs 20,00,000 crore package to make India self-sufficient focusing on land, labour, liquidity and laws. An economic package worth Rs 20 lakh crore or 10% of the GDP has been announced to enable a foothold for the country’s economic self reliance. Whereas you have expressed this as a special economic package today to play an important role in the ‘Atmanirbhar Bharat Abhiyan’. The announcements made by the govt over COVID, decisions of RBI &this package totals to Rs 20 cakhcrores. Which is 10% of India’s GDP and Special economic package will have emphasis on land, labour, liquidity and laws.

In your address to nation you have also said that Indians have to be ‘vocal about local’in this hour of crisis, local suppliers have met our demands; Indians have to be ‘vocal about local‘ and buy products from them and the coronavirus will be a part of everybody’s lives for a long time. “Coronavirus going to be part of our lives for long time, but we can’t let our lives revolve around it only and the global brands we see today were once local, they grew after their countrymen supported them. From today, all Indians should become vocal for our local products. However to accept this fact we are late but we are backing this vocal for local.

From above message it is clear that intention of government is to save the industry as well country as whole accordingly with good intention a special economic package was announced but in drafting of said package real picture on floor was not been looked into as most of MSMEs will not be able to survive unless otherwise real non-refundable money is being infused in system because in lockdown period they have lost huge amount which they are not going receive in future and secondly due to lower demand in next one year they will not able to make profit or utilise their capacity to the pre pandemic level hence they will not in position to repay existing loan as well as additional loan accordingly nearly 50 percent will default and Today  borrowing of MSMEs is nearly 20 lacscrores and with this 3 lacsCrore it will become around 23 Crores and even if 25 Percent Default bank may lose around 5.75 Lac crore no doubt based on past experience 50 percent to it may be recovered by enforcing recovery proceedings than also actual losses to bank will be around 3 croreequalant  to the line of credit being announced whereas actual cash reimbursement would have been lesser than and interst will survive which will help in tax revenue of government and job opportunity. Hence request to modify this package or announce an additional package which is in need today

Though it not needed because you and your Team are having very rich experience and expertise in economics however I being very small professional is tried to explain whatever knowledge accordingly we have explained what is Stimulus and types of stimulus

A stimulus package is a package of economic measures put together by a government to stimulate a floundering economy. The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending.The theory behind the usefulness of a stimulus package is rooted in Keynesian economics, which argues that the impact of a recession can be lessened with increased government spending.

A stimulus package is a coordinated effort to increase government spending—and lower taxes and interest rates in order to stimulate an economy out of a recession or depression. Based on principles outlined by Keynesian economics, the goal is to increase aggregate demand through increased employment, consumer spending, and investment. A stimulus package includes a number of incentives and tax rebates offered by a government to boost spending in a bid to pull a country out of a recession or to prevent an economic slowdown.

A stimulus package can be in the form of either a monetary stimulus or a fiscal stimulus. Quantitative easing (QE) is another form of monetary stimulus.

Monetary stimulus

A monetary stimulus involves cutting interest rates to stimulate the economy. When interest rates are cut, there is more incentive for people to borrow as the cost of borrowing is reduced.

An increase in borrowing means there’ll be more money in circulation, less incentive to save, and more incentive to spend. Lowering interest rates could also weaken the exchange rate of a country, thereby leading to a boost in exports. When exports are increased, more money enters the economy, encouraging spending and stirring up the economy.

Fiscal stimulus

When a government opts for a fiscal stimulus, it cuts taxes or increases its spending in a bid to revive the economy. When taxes are cut, people have more income at their disposal. An increase in disposable income means more spending in the country to boost economic growth. When the government increases its spending, it injects more money into the economy, which decreases the unemployment rate, increases spending, and eventually, counters the impact of a recession.

This is an expansionary monetary policy in which the central bank of a country purchases a large number of financial assets, such as bonds, from commercial banks and other financial institutions. The purchase of these assets in large amounts increases the excess reserves held by the financial institutions, facilitates lending, increases the money supply in circulation, drives up the price of bonds, lowers the yield, and lowers interest rates. A government will usually opt for quantitative easing when a conventional monetary stimulus is no longer effective.

The mega Rs 20 lakh crore stimulus package announced on Tuesday by PM Modi includes previously announced measures to save the lockdown-battered economy, and focuses on tax breaks for small businesses as well as incentives for domestic manufacturing. The combined package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world after the financial packages announced by the United States, which is 13 per cent of its GDP, and by Japan, which is over 21 per cent.

The Rs 20 lakh crore package includes Rs 1.7 lakh crore package of free food grains to poor and cash to poor women and elderly, announced in March, as well as the Reserve Bank’s liquidity measures and interest rate cuts. While the March stimulus was 0.8 per cent of GDP, RBI’s cut in interest rates and liquidity boosting measures totalled to 3.2 per cent of the GDP (about Rs 6.5 lakh crore).

Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of Covid-19. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity.The package, he said, will focus on land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, labourers, middle class, and industries.

But On Analysis of entire package we could not see main aim for stimulus pacakage and real outgo of Government is around 2lacs Crore only as compare to 20 lacs as announced balance is either in form of laon which is an estimated figures because we don’t know how much  bank will disbursed out of 3lacs croresor there may be chance few Borrower may not opt for this due their inability to repay and evan balance who opt will not able to repay accordingly these cannot be treated as Stimulus Ppackage as main objective of any stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending which is missing. And the largest single additional cost of Rs 40,000 crore due to higher allocation to MNREGS is also not justified because it is impossible to create any job due non availability of projects in hand as these projects needs time for planning accordingly either there will be free payment or it will be pacakage on paper , we suggest that this 40000 Crores Must have given to employers of these workers who can use them result of which there will be increase in production and Job would have been intact . to the extent our experience additional allocation without allocation of additional project is waste of money and it will also impact MSMEs adversely as these workers will not resume their duty.

Only about 10% or Rs 2.1 lakh crore of this stimulus can be traced as direct additional budgetary cost to the central exchequer. Nearly 5% of the stimulus relates to already budgeted expenditures. The rest of the stimulus primarily pertains to RBI’s liquidity enhancement measures, government’s credit guarantee programs and insurance schemes.”The actual additional cost of Rs 20.97 lakh crore stimulus package to the government could be just Rs 2-2.5 lakh crore, or 1-1.2% of the gross domestic product (GDP). The additional fiscal impact of these announcements could be minuscule as a large part of the stimulus package included liquidity measures, announced by the Reserve Bank of India (RBI) since February, which will not have any immediate bearing on the government’s finances. Besides, the cost of some of the announcements was already budgeted for. Though, a clearer picture on the actual cost of these measures would emerge only after the government comes out with further details.

Based on our experience and knowledge in economics we state that most part of this package is either spending on health or spending on the largest single additional cost of Rs 40,000 crore due to higher allocation to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) and Rs 1.7 lakh crore PM GaribKalyan Package (PMGKP) announced for distribution of free foods and health prevention matters which never canbe part of stimulus package as it is responsibility of any government. Apart from the additional MNREGS allocation of Rs 40,000 crore, the other major expenditures include Rs 20,000 crore allocation through Pradhan MantriMatsyaSampadaYojana (PMMSY), Rs 10,000 crore Fund of Funds corpus for MSMEs, Rs 10,000 crore for micro food enterprises, Rs 8,100 crore Viability Gap Funding (VAF) for infrastructure, Rs 6,000 crore Compensatory Afforestation Fund Management and Planning Authority (CAMPA) fund for tribals and adivasis, etc. all these are part of budgetary policy of the country hence we don’t know how these included in this package.

Today that the near-term fiscal expenditure due to these announcements could be Rs 2.1 lakh crore, or 1% of the GDP. “This excludes credit guarantees, liquidity infusion for DISCOMs, TDS/TCS cuts, measures already included in the Budget this year, and the adjustment for multi-year outflows. Other part of stimulus package is only part of reforms and policy matters of country. We must have Friendly investment Policy, Ease of Doing Business and Reform policy such as Disinvestment , simplification of  labour law etc are main ingredient of government policy and if these were missing which we are removing our bottle necks than we should not treat these are part of relief packages.

Image of Table

The stimulus provided by the announcements in the first tranche stood at Rs 5,94,550 crore, including measures such as reduction in TDS/TCS rates (Rs 50,000 crore) and emergency working capital for businesses including MSMEs (Rs 3,00,000 crore).The second part had announcements worth Rs 3,500 crore on free food grains supply to migrant workers for 2 months  and housing CLSS-MIG worth Rs 70,000 crore.The second tranche totaledRs 3,10,000crore. Stimulus under Part-3 included incentives for Food Micro Enterprises totalingRs 1.5 lakh crore and agri infrastructure fund of Rs 1,00,000 crore.The announcements in 4th and 5th tranche totalled Rs 48,100 crores. Our Finance Minister MS  NirmalaSitharaman had earlier indicated that the package will revive the economy holistically and added that the AatmaNirbhar Bharat will support people from all walks of life affected by coronavirus pandemic whereas she added that this shall not be just a financial package, but a reform stimulus, a mind-set overhaul, and a thrust in governance which she has also agreed that this is reform package not relief package.

RBI faces herculean task! Borrowing target Rs 22.69 lakh, savings available Rs 14 lakh crore. The centre has increased its borrowing from the budgeted Rs 7.8 lakh crore in 2020-21 to Rs 12 lakh crore. Similarly, the states borrowing which was estimated at Rs 6.41 lakh crore in 2020-21 has now increased  to Rs 10.69 lakh crore . The big challenge to market borrowings comes from the limited gross financial savings in the economy. The net financial savings which are available in the economy are less than 7 per cent of the GDP, which comes out to be around Rs 14 lakh crore. Even this pool would decline in a slowing economy because of falling income levels, job losses and salary cuts post Covid and the lockdown disruption of businesses.

The state chief ministers were actually pleading with the Centre for long to relax the Fiscal Responsibility Budget Management (FRBM) Act from 3 per cent to 5 per cent of the GDP. This is a good step as it would provide a headroom to states to borrow additional money from the market to bridge their revenue shortfall and also additional expenditures. The challenge is for the RBI to manage the borrowings at the lesser cost as yields or the rates would spike in the market.

Atmanirbhar Bharat Abhiyaan VS Economic Package of Other Countries for Coronavirus Stimulus. Atmanirbhar Bharat Abhiyaan economic package announced by PM Modi to revive Indian Economy. Know difference between COVID-19 Relief Economic Packages announced by India & Other Countries. The 20 lakh crore package is valued 10% of India’s GDP in 2019-20

India’s Atmanirbhar Bharat Abhiyaan has already gained momentum by being one among the largest Coronavirus Stimulus Packages announced by various nations to fight COVID-19 pandemic economically. This 20 lakh crore worth package is valued 10% of India’s GDP 2019-20 and is aimed at making India self-reliant in all aspects. Majorly all the countries across the world have announced their respective economic packages to tide over current situation of COVID-19 crisis including the US, Japan, Germany, and others.

PM Modi’sAtmanirbhar Bharat Abhiyan ranks behind the stimulus packages announced by the US, Japan, Sweden, Australia and Germany in terms of spending percentage of the GDP. However, in terms of the value, India’s package ranks at 19th position. Smaller economies such as Belgium and Luxembourg have spent fifth of their GDP at 20.7% and 19.2%, respectively.

Here are the details of the economic packages announced by various countries. The countries are ranked on the basis of value of their package in terms of their GDP. The ranks have been decided after analysing the data compiled in ‘COVID-19 Economic Stimulus Index (CESI)’ by economist Ceyhun Elgin. Have a look

Coronavirus Stimulus Packages: Country-wise Details

Country Package Details Value in terms of GDP
Japan USD 1.1 trillion recovery package 21.1% of its GDP
United States (US) USD 2.7 trillion packages (largest in pure dollar terms) 13% of its GDP
Sweden 12% of its GDP
Australia 10.8% of its GDP
Germany USD 815 billion package 10.7% of its GDP
India USD 265 billion (Rs 20 lakh crore) 10% of its GDP
France 9.3% of GDP
Spain €200 billion 7.3% of GDP
Italy Approx. USD 815 billion package 5.7% of GDP
UK £1.25 billion 5% of GDP

 How is Value of Atmanirbhar stimulus package higher & bigger?

1. Rs 20 lakh crore worth coronavirus stimulus package is higher that the GDP of a few economies such as Greece, New Zealand, Vietnam, Portugal, and Romania.

2. India’s stimulus value is almost equal to Pakistan’s GDP of USD 284 billion.

3. The package is 1.8 times bigger than the fortune of Top 10 Richest Indians, which is USD 147 billion.

4. It is five times the wealth of richest Indian, MukeshAmbani.

5. The package is the fifth-largest among the G-20 countries in terms of spending in relation to GDP.

What is Difference between Atmanirbhar Bharat Abhiyaan& Economic Packages of Other CountriesNew & Old Funding: The economies around the world have announced new spending in their relief packages entirely. Unlike other countries, India’s Self-reliant economic package is not totally in new spending and involves 1.7 lakh crore funding that was announced by Government in March 2020 and also includes measures taken by the RBI such as liquidity infusion and cuts in interest rates. The Atmanirbhar package includes, Rs 1.7 lakh crore  funding announced in March 2020 to provide free food grains& cash to poor, poor senior citizens & women., RBI’s Rs 3.7 lakh crore liquidity support announced in March 2020 &Rs 2 lakh crore funding announced in April

Government & Central Bank Spending: India’s package is not entirely a government spending. The package includes spending of the Reserve Bank of India (RBI). In case of the US, the entire USD 2.7 trillion package is by the Trump Administration and does not include Federal Reserve funds.

  • Now after analysis of Stimulus Package being announced by Indian government we must understand what is present condition of these MSMEs and impact of their failure on GDP of the country and job losses. Everyone who understand business and economy are knowing that most of these MSMEs are at verge of closure and present stimulus package will not be sufficient to revive these MSMEs hence we suggest further allocation of funds by way additional Package for MSMREs.

According to some reports, 99.5 per cent of MSMEs fall under the micro category, and are distributed, more or less, equally across urban and rural India. The remaining small and medium size enterprises are disproportionately located in urban centres. India’s 6.34 crore MSMEs have been among the worst-affected companies from the outbreak, and the lockdown measures implemented to halt the spread of the virus. India’s MSME sector – the lifeblood of the Indian economy – contributes approximately 29 per cent to the country’s growth, is responsible for 48 per cent of all exports, and employs over 11 crore people, 55 per cent of whom are employed in urban MSMEs.

Respected we MSMEs not in position to beg or cannot go street as we understand the image of the country but it fact that entire India is struggling with the pandemic and recession . To facilitate an economic recovery and build greater resilience to the crisis, we suggest few additional support of the India’s Revival Mission where the governmental support India’s MSME sector may need to relieve it of its economic plight. Considering these facts and Present Position of MSMEs we suggest further relief package with approximate amount of 2 lac Croreand based on experience in finance as well economics we assure that benefit to government in form of Higher than this amount by way of payment of Direct and indirect Taxes, lower NPA to Banks, lower job losses, uses of power accordingly this additional support will not be wasted but it will be invested. These suggestion are given under.

1. Reimbursement or wage support for one month’s wage Bill to the tune of Rs 50000 Crores as the MSMEs are facing, their inability to pay employee salaries accordingly suggest that government additional 50000 crores should be given to these MSMEs where government may use funds within the Employees State Insurance Scheme corpus in order to provide wage support for workers in the formal sector.

2. The central government is also mulling over the idea of extending the 3-month loan moratorium the RBI previously sanctioned for companies with term-loans. Although it is still unknown how long the moratorium will be extended for, some reports suggest it could be between 6 and 9 months.

3. Interest Waiver of Rs 90000 Crores for six Months on 18 lacsCroresi.e 15 lacs plus 20 percent additional and interest subvention of 3 percent for balance 6 months i.e 27000 Crores because MSMEs are currently facing involves a lack of working capital whereas you had supported with additional loan of 3 LacsCrore but interest waiver is neither announced and nor subvention of interest is given hence we suggest to waive the 6 months’ Interest on existing as well new additional 20 percent as part of Stimulus package of 20 lacsCrore. This is immediately required as production came to a standstill, many businesses have found themselves severely cash-strapped, having not received dues for products they have already supplied.

4. The RBI has also undertaken a series of repo-rate operations with a view towards improving credit flow within the MSME sector. However, given the sentiment of risk-aversion pervading through the commercial banking system as a consequence of increased governmental oversight across lending practices, as well as the grim economic outlook, banks have, till date, refrained from extending the benefits of the RBI’s measures to companies and though RBI has reduced Repo and reverse repo rate but same has not been passed to Borrowers accordingly we suggested spread of 3.5 percent to cost of borrowing over should be fixed for lending to MSMEs.

5. Reduction in power rate and waiver of Electricity Duty for one year as unit price charged to all Manufacturing facility is ranging from 7 to 9 percent which is much higher than present cost  of power and we also suggest at 30 percent consumption should be generated by Solar power plant installed for captive consumption.

6. Limits of Number of Employees for applicability of all existing Labour law and factory licence should be raised to 50 from present limit of 20 and administrative charges on EPF and ESIC should be waived for one year.

7. We suggest for a deferral of GST payments to provide some relief in the form of GST and corporate tax waivers. The Centre may also look to hasten payments in the form of GST dues to MSMEs. 

8. Additional support of nearly Rs 50000 per unit for technology support for work from home for their administrative staff which is need of the hour. MSMEs should be sanitised by government agency under common category.

9. We also suggest that instead of Providing the package for MNGRE the wage bill support should be given to MSMEs because to create a new government project is so easy accordingly there will additional burden on government but if wage support is given to MSMEs there will additional production being generated which will help government in term of additional taxes and export forex reserves.

Considering the above facts whether states or central government are at comfortable position accordingly government can borrow additionally to save Economy especially battered MSMEs or RBI Can print additional Currency for this additional package. Any loan upto 10 percent of GDP under this situation will not worse for the government as compare to failure of these MSMEs.

We hope that being guardian of the country as whole we all MSMEs to provide additional support as suggested above to safeguard their survival. We have full confidence on you will not leave us to die because in realty at present MSMEs are at very crucial level where their survival is on stake for which you only can save.

Thanks with warm Regards
CA Radheshyam Sharma ( Partner )
[email protected]  or [email protected]


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