'Soft loan for MSMEs, cash transfers expected'

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SME Times News Bureau | 25 Mar, 2020
As the country goes into a 21-day lockdown starting Wednesday in view of the coronavirus crisis, Emkay Global Financial Services expects that the government would offer soft loans for Micro, Small and Medium Entreprises (MSMEs), cash transfers and restructuring of loans to provide to the sector which would be severely hit due to the lockdown.

In a report on Wednesday, Emkay said that for the "first time in living memory", many industries or SMEs (small and medium enterprises) will be running on zero revenue for close to a month.

"Even the 'opening up' after the lockdown is likely to be measured (lest a asecond wave' hits back). This means that there will be a permanent impact of this 21-day shutdown even into the longer-term numbers (that of funding the fixed costs when revenues are nil)," it said.

Daily wage earners in cities could be badly hit as they cannot go back to their hometowns either, with all public transport being grounded. The share of unorganised sector is high, and this segment was still emerging from the back-to-back shocks of demonetization and GST, it noted

"The shutdown could push them to the brink," said the report.

"We would expect measures like MSME soft loans, loan restructuring, cash transfers, etc. In addition, at the moment - given the quick decisions on shutting down public transport - it is unclear if we should be worried about the disease spreading from urban areas to the rural areas too," Emkay said.

It said that although some state governments have offered free food supplies and cash transfers, there is no nationwide effort announced yet.

On the stock markets, Emkay Global said that sentiments in the global markets would depend on the drop of positive coronavirus cases in the US and Europe.

"For sure, many Indian stocks have fallen to attractive levels. However, we retain the view that the global capital market sentiment would hinge on sustained drop in new daily case counts in the US and Europe," it said.