Guaranteed loans have multiplier effect

Government guarantee will help and restart businesses which will kickstart the virtuous circle of employment, consumption, and growth

The Covid-19 pandemic has devastated many sectors in India leading to significant loss of livelihood. Salaried people have lost their jobs and the self-employed have been forced to shut down. 

Among other things, the government has announced a guarantee package of Rs 3 lakh crore for medium and small enterprises (MSME). The government will stand guarantee for loans taken by MSMEs. The government guarantee will enable the MSME sector to borrow collateral-free at good rates and restart their businesses. This will kickstart the virtuous circle of employment, consumption, and growth. 

The guarantee route allows the government to get more out