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Second stimulus package - create confidence, focus on growth
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Bikky Khosla | 23 Dec, 2008
Currently with the economy in the grip of severe recession, which is likely to persist longer than we would like to believe, the government and RBI have to do some serious thinking before they come up with the second stimulus package for the industry.
Though big corporates have a relatively safe liquidity position, MSMEs on the other hand are closer to the edge with nothing much left in their kitty. Considering the fact that the MSME sector has greater importance in the value chain, unless the second stimulus package has something substantial for the sector, the entire economy stands to lose immensely.
However I feel that merely lowering interest rates will not help. Measures now have to create confidence in investors and buyers.
Since most MSMEs act as facilitators for big companies, they are facing the problem of delayed payments. As such, their liquidity is hit to a greater extent. Increasing the eligibility criteria for extending collateral-free credit, can be a good option to help them to tide over the crisis of liquidity crunch. The government can extend collateral-free credit under the Credit Guarantee Fund Scheme to Rs 1 crore per borrowing unit, which is currently just limited to Rs 50 lakh.
The second stimulus package should also encourage investors to invest rather than hold on to cash for fear of future loss. It should also infuse enough confidence amongst the buyer to make purchases, which will thus add to the demand factor.
From the exporter's point of view, the stimulus package should encourage higher infrastructure spending and should remove all roadblocks. This will help exporters to overcome the current fall in export demand. In order to encourage exports, the government could consider increasing duty drawback benefits and reducing interest on export credit. The package has to allow greater duty drawback and duty entitlement passbook scheme (DEPB) benefits to troubled exporters in labour-intensive sectors like textiles, handicrafts, etc.
I strongly believe that at this point of time and considering the global economic situation, concessions to exporters will help them continue to export in a shrinking global market. The ball is in the court of the authorities. Within a few days time we will know all.
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Stimulus packages from the Government
Abraham Thomas - Dandeli | Fri Jan 9 02:49:06 2009
It is encouraging to see that the government is trying to do some thing. However, they should consider som special packages to SMEs such as tax holidays, reduced interest rates etc. to encourage more people to enter into this field. Our SMEs are the back bone of our country providing the largest employment opportunities in rural india.
STIMULUS
b v rao, bangalore | Fri Dec 26 03:42:16 2008
No amount of stimulus will help unless the loot by our politicians and babus are controlled. See the UP loot of 1,000 crores. The corruption under IBR Act, Factory act , PF act, ESI act etc are unimaginable. The ex CM of Karnataka had an official wealth of Rs 4 crores in 2004 and now he is worth 39 crores. His wife who is not any professional is now worth 29 crores. The list of looters is very long
Payment of SME's from Large manufacturers under BIFR.
ROHIT KAYA | Thu Dec 25 03:31:41 2008
Most of SME's supply their material to Large Manufacturers.Due to failure of product and mismanagement of large manufacturers most of SME's money got blocked with large manufacturers.And these large manufacturers under the BIFR shield never pay the overdue payments with the help of local authorities to SME's inspite of SME's Act 2006.
Due to above scenario No. of SME's are running with the accute shortage of Capital & loose their confidence in supplying to Large manufacturers. As SME'S have to pay the Regular Intt. to the Financial Institutions,as most of them operate after taking the loans under different types of schemes from financial institutions.
Under this situation Banks consider the SME's Amt due on large manufacturers under BIFR scheme as NPA and creates the situation such that it not only closes the path of developments of SME's, but also survival of SME's become very difficult.
Therefore, Govt. should look into this matter immediately to protect the SME's business and increase the SME's confidence by facilitating him to collect his due amount from large manufacturers under BIFR Shield as Land revenue.
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