As a matter of gratitude, firstly,  Hon’ble FM announced medical insurance cover of Rs. 50 lakh to first line workers i.e Health worker against Covid 19. They are termed as “Gods in White” and rightly so. 

Hon’ble Finance Minister while announcing 1.7 lakh crore package coined as “Pradhan Mantri gareeb kalyan scheme” took a calibrated approach and this package was primarily announced to be passed upon to the most vulnerable of people in next three months due to pandemic situation. It will be provided majorly in two forms –

1) Food Security

2) Cash transfer through direct benefit transfer and welfare measures.

As the name of today scheme suggests it is mainly directed towards the poor and most vulnerable of people in this pandemic, however, there is one particular measure directly announced for and relevant for MSME’s and start-ups from an employer point of view is regarding EPF contribution 

  • For business having less than 100 employees –EPF contribution of both employer and employee will be made by government for next three months i.e. 24% contribution in total will be made by government 

What this will do is it will act as financial subsidy for small business who are required to deposit 12% as Employer contribution in Provident fund for next three months.

  • EPF norms will be amended to allow withdrawal of PF funds up-to 75% of amount deposited or 3 months of salary/ wages whichever is lower.

What this will do is it will relive small business to some extent to sustain their employees can withdraw some amount from PF funds so that they can sustain     

Also though there is no direct incentive provided to MSME’s/ Start up’s but if 1.7 lakh crore package is closely analyzed it is directed to transfer some cash through Jan-Dhan accounts or food security through PDS channel. This will help sustain daily workers/labor class of MSME’s where these companies might find it difficult. 

It is just to highlight here the fact that statutory deadline have already been extended as announced 36 hours back in general till 30th June as if now hence this is also an indirect support launched by government in this testing times.

What was missing in this financial package and what is expected in future??

  • No infusion of immediate liquidity through this 1.7 lakh crore package – It can be argued that this 1.7 lakh crore package will not act as cash fund stimulus for the market instead it seems to be front loading i.e. schemes already in place are forwarded. It seems major amount of Rs. 1.7 lakh package is largely in the nature of front loading and reallocation of expenses. Since this is majorly a reallocation of expenses or front loading of funds almost no cash inflow will result from this package in dying world and economy. MSME’s and start up’s are waiting for cash infusion in the economy for their survival.
  • No Relaxation measures in paying borrowed funds – No announcement were made today for business particularly for MSME and start up’s like relaxation of NPA norms or EMI relaxations. However, Hon’ble FM in response to press question said such announcements can be made in future. Markets have responded negatively immediately as currently expectation of market are not met but at the same time heavy industry can wait in this pandemic situation as Government has taken calibrated approach i.e. to first cater to the needs of hour of lower section of society

Hope the next measures taken meet the expectations of businessman and RBI and SEBI are also brought in the pitcher for much needed cash, liquidity relaxations which can act as financial dossier for MSME and start up’s because most of them are working on borrowed funds and in this global economic slowdown, they might face serious shortage of cash funds to repay loans. 

  • A pragmatic capitalistic approach is required rather than a wait and watch kind of approach from government – Capital is the essence of business and cash rich companies should be approached legally or otherwise to infuse capital in the market. It is the need of hour, Government cannot sit and react when it’s too late.

Current Measures under “Pradhan Mantri gareeb kalyan scheme” braody segregated into two forms i.e “foods security” and “cash transfers” for the poor/ vulnerable section of the Society. 

Hope Hon’ble FM will respond quickly to most vulnerable section of business i.e. MSME’s and start-ups if they are not provided Financial dossier soon they will perish and as a result economy will go in slum.

About Author :

C.A. Navneet Mangal (FCA, ACS, B.Com)

Author is a practicing Chartered Accountant providing consultancy and advisory services to various corporates in states of Rajasthan, Delhi and Punjab. In his about 9 years of post-qualification experience, he has extensively worked with corporates  in the area of tax planning, advisory, audit of Clients records of indirect taxes and other compliances. His regular involvement in corporates and start-ups has helped him understand the issues faced by them, their expectations and what is lacking. He is regularly engaged in writing Articles on various issues.  

He has been awarded with Maharana Mewar Foundation Award in the Year, 2012 for his brilliant performance in CA Examinations.

 CA Navneet Mangal can be reached at the mail id –  navneetmangal1210@gmail.com