As India battles the COVID-19 pandemic, chief financial advisor Krishnamurthy V Subramanian on Friday hinted at a attainable authorities mortgage assure to melt the blow for sure sectors like MSME, and anticipated that the pandemic would drag down tax income collections to the tune of 1% of GDP (roughly Rs 2 lakh crore).
Stressing that FY21 goes to be an distinctive 12 months because of the pandemic, Subramanian informed CNBC-TV18 that the federal government may discover the potential for greater market borrowing to fund productive spending. The Centre had budgeted gross market borrowing of Rs 7.eight lakh crore for FY21 and had just lately introduced its plan to borrow roughly 62.5% of it within the first half itself.
He stated sufficient availability of working capital to MSMEs stays a matter of focus and that lenders can elevate the restrict of such loans by 15-25%. Steps to spice up lending by monetary establishments are being taken. As FE has identified, aside from enormous well being expenditure and funds for the poor, the federal government must arrange an officially-guaranteed fund to backstop all MSME loans.
Even earlier than the COVID-19 began to unfold, non-food credit score progress had crashed to simply 6.3% year-on-year within the fortnight by February 14, the bottom since May 2017, mirroring a broader financial slowdown and threat aversion amongst bankers. The credit score progress plunged additional to six.07% for the fortnight ended March 13, because the pandemic influence began to chunk.
Given that the pandemic and a consequent pan-India lockdown have stoked unprecedented structural volatility, the CEA stated GDP estimates might need to be revised a number of instances to seize the precise churnings within the economic system.