Sakshi Education
The importance of the Micro, Small and Medium Scale Enterprises (MSMEs) sector for the revival of the economy on the strength of Atma nirvana (self- reliance) can be seen from the following: After agriculture, MSME is the second- largest employment provider in India.
Presently, there are nearly 56 million such enterprises in various industries, employing close to 124 million people. Of these, almost 14% are women-led enterprises, and close to 60% are based in rural areas. MSME sector accounts for 45% of merchandise exports 8% of India’s GDP. Due to this, the MSME sector is called the growth engine of the nation. Strengthening them would have multiple impetuses boosting economy and employment as well as mitigating issues of migrating skilled, unskilled workers and professionals to metro cities.
The major challenges that MSMEs are facing right now due to the pandemic is shortage of labour, restricted cash flow, inability to pay back loans, and difficulty in getting permissions from the government. This has slowed down pace of production.
Government announced relief measures. One of the key components of the government’s Atma Nirbhar Bharat stimulus package to boost the economy, announced in mid-May, was a set of relief measures for micro, small, and medium enterprises (MSME). The move was aimed at small businesses that were hit hardest by the pandemic-induced lockdown.
The definition of MSMEs was changed so that even when they grew in size they will not lose benefits like subsidies thus making them invest and become competitive. But the criticism is that the bigger ones among them will corner the benefits.
Government announced the creation of ‘Fund of Funds’ with a corpus of Rs 10,000 crores where the government through the funds will pick up an equity stake in the MSMEs with growth potential and viability. These equity infusions will lead to increase in size and capacity of the MSMEs and the revision in the definition of MSME is correlated to this. Further, the long-term goal of such equity infusion is to encourage the MSMEs to list on stock exchanges.
The collateral-free automatic credit line and the subordinate debt to MSMEs may be a game-changer for a sector which is finding it harder and harder to find credit support from banks and other financial institutions. It will make it lucrative for risk- averse banks to resume lending operations as the government will act as 100 per cent guarantor on both the principal and the interest.
The Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs has been extended till March 31, 2021.
Atma Nirbhar may be construed as import substitution which is primarily focused on giving a fillip to the MSMEs.
These measures are likely to strengthen the MSMEs.
The major challenges that MSMEs are facing right now due to the pandemic is shortage of labour, restricted cash flow, inability to pay back loans, and difficulty in getting permissions from the government. This has slowed down pace of production.
Government announced relief measures. One of the key components of the government’s Atma Nirbhar Bharat stimulus package to boost the economy, announced in mid-May, was a set of relief measures for micro, small, and medium enterprises (MSME). The move was aimed at small businesses that were hit hardest by the pandemic-induced lockdown.
The definition of MSMEs was changed so that even when they grew in size they will not lose benefits like subsidies thus making them invest and become competitive. But the criticism is that the bigger ones among them will corner the benefits.
Government announced the creation of ‘Fund of Funds’ with a corpus of Rs 10,000 crores where the government through the funds will pick up an equity stake in the MSMEs with growth potential and viability. These equity infusions will lead to increase in size and capacity of the MSMEs and the revision in the definition of MSME is correlated to this. Further, the long-term goal of such equity infusion is to encourage the MSMEs to list on stock exchanges.
The collateral-free automatic credit line and the subordinate debt to MSMEs may be a game-changer for a sector which is finding it harder and harder to find credit support from banks and other financial institutions. It will make it lucrative for risk- averse banks to resume lending operations as the government will act as 100 per cent guarantor on both the principal and the interest.
The Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs has been extended till March 31, 2021.
Atma Nirbhar may be construed as import substitution which is primarily focused on giving a fillip to the MSMEs.
These measures are likely to strengthen the MSMEs.
Published date : 02 Dec 2020 12:49PM
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