Indian government could guarantee $39 billion worth loans to small businesses

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COVID-19 lockdown has not just hampered the movement of resources internationally, but they also have damaged economies. Countries like France, Italy, and Germany have been severely hit in this phase and although the cases have gone up in India, one has to accept that the country is in much better shape in a relative sense.

However, with the government ordering all non-essential retail and manufacturing units to be shut down, a lot of small businesses have been facing financial adversities. Although the Indian economy is expected to revive once the pandemic subsides, it is hard to comprehend a timeline for that and how the SME and MSME sectors will survive up until that point.

The Indian government has done praise-worthy work in ensuring the disease doesn’t spread like wildfire in the country that resides over a billion people. They’re also keen on taking measures which can help many of these small businesses recover their losses and as per Economic Times, the government is planning to announce a $39 billion loan guarantee to small business owners across the country.

Under this proposed scheme, small business owners will be able to avail 20% more than their credit limits through loans. This extra debt plan which is currently in consideration is likely to be materialized as the government seems to be liking the idea and its implementation plan.

Refinancing schemes the way forward for economies?

Having faced one of the most unfortunate circumstances of the century, the global markets have been adversely hit but most governments have reacted by announcing reform. Governments, including that of the USA, have offered refinancing schemes for businesses to help them get out of this crisis.

The US has announced that it would provide $320 billion to make new loans under the Paycheck Protection Program, which provides forgivable loans to such companies that keep employees on the payroll for eight weeks, while the Philippines plans to give 35 billion pesos ($690 million) to workers of shuttered small businesses.

Once the whole situation normalizes to a certain extent, the whole country will be looking towards banking sector for help and it seems like the Modi government has taken cognizance.