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Modi Plans $20 Bn Coronavirus Relief Fund For Impacted Citizens, Businesses: Report

Modi Plans $20 Bn Coronavirus Relief Fund For Impacted Citizens, Businesses: Report

The INR 2.3 Tn ($20 Bn) stimulus package may be announced by the end of the week

The funds will reportedly be used to support businesses impacted severely

India entered a 21-day lockdown period on March 25

Amid the country-wide lockdown, startups have been calling for a relief package for small businesses and the marginalised which are struggling as the coronavirus pandemic continues to hamper daily life. A Reuters report has now said that the India government may bring an INR 2.3 Tn ($20 Bn) relief fund by the end of the week for the poor sections of the population and businesses.

The details of the plan have not yet been finalised but the discussions are ongoing between the Prime Minister’s office, finance ministry and the Reserve Bank of India (RBI). The relief fund will reportedly be used to put money directly into the accounts of more than 100 Mn poor and marginalised in India, and to support businesses hit the hardest by the lockdown.

The report added that the government will also increase its borrowing plan for the fiscal year 2020-21, which starts from April 1, from the current planned gross borrowing of INR 7.8 Tn. The RBI may also buy some of the government securities being issued. Further, the report said that the government may also leverage RBI’s overdraft facility for states if there is a cash crunch.

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On Tuesday (March 24) evening, Prime Minister Narendra Modi announced that the whole country has been put on lockdown and had announced INR 15K Cr package to strengthen the Indian healthcare infrastructure. The fund will be used to develop testing facilities, personal protective equipment and procure more isolation beds, intensive care unit (ICU) beds and ventilators. Moreover, the government will be using the fund to train paramedical and medical staff.

Earlier in the day, finance minister Nirmala Sitharaman had relaxed timelines for filing taxes and raising default thresholds for invoking bankruptcy proceedings. She had added that the government will soon announce a package to address the coronavirus impact on the economy.

However, startups and small businesses were getting anxious about the support from the government considering the pressure they are facing to keep the operations running smoothly in the light of funds being scarce and market demand being low. This combined with the pressure to plan for remote teams due to the lockdown across India.

DataLabs by Inc42 in its Business In The Times Of Coronavirus: India And The World report noted that the fall in funding deals has become more evident since February and has shown a downward trend in the last few weeks.  In January-February 2020, the total number of deals stood at 154, up 29% compared to 119 a year ago. Despite this good start, factors such as pandemic-related travel restrictions, lack of in-person meetings and general panic in the market have impacted the frequency of deals.