MSME, tourism, healthcare among top 9 sectors to benefit most from Sitharaman balm: Experts

Four of the eight announcements by the Finance Minister were new and the other four were extension of existing schemes. According to analysts, the stock market is likely to react positively as the steps will help economic recovery, with limited fiscal cost.

In an attempt to revive the pandemic-hit economy, Finance Minister Nirmala Sitharaman, on June 28, announced eight economic relief measures. Four of them were new and the other four were extension of existing schemes.

Sectors such as health, Micro, Small and Medium Enterprises (MSMEs), tourism, hospitality, fertilisers, NBFCs, healthcare, electronic manufacturers and IT stand to gain the most.

Barclay’s, in a report, estimated that the additional fiscal spending for the measures announced so far, including previously announced ones, to be Rs 1.5 lakh crore, which raises the fiscal deficit forecast to 7.5 per cent of the GDP.

“These steps build on the previous packages and include small loans and specific assistance for the tourism sector. Taken together, the initiatives could help improve credit flows to small and MSME firms,” added the report authored by Rahul Bajoria, Chief India Economist.

Sitharaman announced additional measures to provide greater financial support to COVID-hit sectors as the number of cases in the country continues to decline.

The stock market is likely to react positively as the steps will help economic recovery, and will have limited fiscal cost.

“The FM announced a series of relief measures to alleviate the concerns of a wide strata of the population due to the second COVID wave, and ahead of the anticipated third wave,” Dhiraj Relli, MD & CEO, HDFC Securities, said.

“A lot of thought seems to have gone into the announcements, with a wide spectrum of the population standing to benefit. Although the total impact seems large at about Rs.6.29 lakh crore, a large portion of this is by way of credit guarantee schemes where there is no immediate outflow,” he said.

“The impact of these announcements on the fiscal deficit will be limited while the stock markets could give a mild positive reaction,” Relli said.

From a market standpoint, the announcement will be taken positively, although some of them might have been factored in. We have collated inputs from various experts to decode the sector-specific impact based on the announcements.

Expert: Ajit Mishra, VP - Research, Religare Broking Ltd

MSMEs and Travel & Tourism

The announcements were largely focused on providing credit support and extending existing schemes, so that the impact of the second wave of COVID-19 could be minimal on the economy and individuals.

Since there is no major direct stimulus announcement, there will be minimal or no impact on the fiscal balance.

The measures announced for the stressed sectors viz., MSMEs and travel & tourism would help in setting a recovery roadmap as they’re still struggling due to restricted activities.

Expert: Siddhartha Khemka, Senior Vice President, Head-Retail Research at Motilal Oswal Financial Services Ltd

It was largely aimed at extending support to the sectors worst-affected by the pandemic.

The announcements included the extension of the Atmanirbhar Bharat Rozgar Yojana. The free tourist visa scheme, additional Rs 1.5 lakh crore for ECLGS, and a Rs 1.1 lakh crore loan guarantee scheme for COVID-affected sectors are among others.

Overall, the announcements largely seem positive for banking/financials as this would aid disbursement.

 

Healthcare

Of the Rs1.1 lakh crore guarantee scheme announced for COVID-hit sectors, Rs 0.5 lakh crore has been assigned towards the healthcare sector at a capped interest rate. This is positive for hospitals, medical equipment suppliers etc.

Banks/NBFCs

The FM also increased the threshold for Emergency Credit-Linked Guarantee Scheme (ECLGS) to Rs 4.5 lakh crore from the current Rs 3 lakh crore. The ECLGS was introduced last May. This is positive for banks/NBFCs as the scheme aims to provide 100 per cent guaranteed coverage to enable them to extend emergency credit to COVID-affected sectors.

MFIs

The Finance Minister launched the Credit Guarantee Scheme to provide loans to small borrowers through Microfinance Institutions (MFIs). This should give confidence to MFI lenders in terms of incremental disbursement and ease funding issues.

Tourism

Several measures were announced for the revival of the tourism sector, including a free tourist visa scheme, 100 per cent guarantee under the credit guarantee scheme, etc.

Fertiliser

FM Sitharaman also announced additional support for DAP and P&K fertilisers. This is positive for fertiliser companies.

Expert: Vinod Nair, Head of Research, Geojit Financial Services

MSMEs, rural, healthcare & hospitality sector

The extension of the emergency credit schemes by 50 per cent to Rs 4.5 lakh crore, with a focus on stressed sectors will be a boom for the struggling MSMEs.

The subsidy financing by 2 per cent interest rate below the RBI rate will be again good for MFIs, NFBCs and small borrowers, which are in dire need of working capital and falling NPAs.

The extended and new Atmanirbhar programme is positive for the broader economy, especially rural, and healthcare and hospitality sectors, though it is unlikely to impact the market directly.

CapitalVia Global Research

The package was multi-faceted and tried to meet the requirements of a large section of people.

Electronic Manufacturers

There is a credit guarantee scheme for nearly 25 lakh MFI borrowers. Large-scale electronics manufacturers have benefited from the extension of the PLI scheme by one year.

An amount of Rs 3.03 lakh crore has been allocated under result-linked power distribution scheme. This will include features such as 25 crore smart meters, 10,000 feeders and 4 lakh km of LT overhead lines.

IT Services

In continuation of the digitisation initiatives of the government, an outlay of Rs 19,041 crore has been announced for providing broadband to villages under the Bharatnet model.

Fertilisers

Nutrient-based subsidy for fertilisers has been hiked to Rs 42,275 crore from Rs 27,500 crore in FY 2020-21. An additional subsidy of Rs 14,775 crore would be provided for DAP and P&K fertilisers.

Healthcare

The depreciating rupee is favourable for exporters, and, therefore, in order to boost exports, the FM announced the infusion of Rs 88,000 crore into the ECGC (Export Credit Guarantee Corporation), which provides credit insurance services, over five years.

In order to boost medium- to long-term projects (MLT), NEIA (National Export Insurance Account) will be given a corpus of Rs 33,000 crore for five years.

The healthcare sector will get Rs 50,000 crore for widening the availability of equipment, medicines, and access to healthcare services. The scheme also aims to focus on short-term preparedness, along with enhancing testing capacity and diagnostics.

Tourism

The sector was the worst-hit by the pandemic and it was a great concern for stakeholders across public spheres. The government decided to announce 5 lakh free tourist visas in order to support this sector.

Expert: Keval Bhanushali, CEO, Marwadi Shares and Finance Ltd

It’s certainly a welcome move for a swift economic revival. Guaranteed loans to the affected sectors will definitely help in an an agile revival of these sectors. The relief for farmers is definitely a strong highlight and was much-needed.

Other sectors that I see strongly benefiting from this stimulus are aviation and entertainment. Paired well with the rapid vaccination drive, this could do wonders for the struggling sectors and help them bounce back quicker than expected.

With that said, I would like to point out that I was also expecting some provisions and contours concerning the ‘bad bank’, which seem to be missing.