India’s PM Pledges $265 Billion Package To Revive Damaged Economy

India will provide collateral-free loans worth $40 billion to boost liquidity for small businesses and help the economy tide over the coronavirus outbreak.

The loans will benefit up to 4.5 million small businesses, Finance Minister Nirmala Sitharaman said in New Delhi on Wednesday. The program will be open until Oct. 31.

“Essentially this is to spur growth and to build a very self-reliant India,” Sitharaman said. “It addresses ease of doing business, compliance and due diligence and the intention is also to build local brands.”

Prime Minister Narendra Modi Tuesday said his government will spend an amount equivalent to 10% of the nation’s gross domestic product to help the economy get back on its feet after weeks of stay-at-home restrictions to beat the pandemic. The resultant halt to non-essential consumption set up Asia’s third-largest economy for its first annual contraction in four decades as businesses collapsed and jobs were lost.

Modi’s spending plan totaling 20 trillion rupees ($265 billion) includes measures already unveiled by the government and also by the central bank such as provision for cheap cash to banks and the reduction in its cash reserve ratio.

The details of the package will be shared in tranches, Sitharaman said, adding that today’s announcement covers 15 different measures, including six pertaining to small businesses and more will be announced over the course of the next few days.

As part of the plan, small firms will be eligible to borrow collateral-free automatic loans for a four-year tenor with 12-month freeze on principal repayments. The loans will be guaranteed by the government.

The plan also includes:

– Injecting 200 billion rupees subordinate debt for stressed small firms, wherein banks will lend to founders who will then infuse it as equity into the business
– Small businesses already in default can also avail the facility
Proposes 500 billion rupee injection into these businesses through a fund of funds with corpus of 100 billion rupees
– Equity futures on India’s NSE Nifty 50 Index traded in Singapore were in the green after the announcement, while the local benchmark S&P BSE Sensex index closed with the biggest gain in almost two weeks.

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In This Story: India

India, officially the Republic of India, is a country in South Asia. It is the second-most populous country, the seventh-largest country by land area, and the most populous democracy in the world. New Delhi is the capital.

It has an exceptionally diverse population, with Hindus, Muslims, Christians, Sikhs, Buddhists, Jains and other religions speaking over 21 recognised languages.

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