Enterprises have been taking a strike due to Covid-19 National lockdown. The supply chain has been rattled, imports are falling, and markets are argumentative. The MSMEs sector has perhaps been the hardest hit.
Business activities involved in the manufacturing will also take a hit on the export business activities as the condition remains uncertain. The MSMEs service sector is also slowing down with more people choosing social distance.
To evaluate the Indian economy among Covid-19 pandemic, the government has announced several advantageous schemes and policies for the MSMEs sector, which may help to escalate the businesses of MSMEs determination of “Aatmanirbhar Bharat[1]”.
Crisis Faced By MSMEs Sector
As per the recent survey report submitted by some legit sources, 26% of enterprises surveyed stated that sales and purchase had been affected due to the pandemic situation of Covid-19; the MSMEs sector is facing a crisis like low liquidity or cash flow and lack of workforce daily.
MSMEs Revised Definition
To MSMEs sector fear of lacking in size to sustain the government’s benefits to enterprises classified according to the current MSMEs definition, Nirmala Sitharaman Indian Finance Minister amended the MSMEs definition. Under the new definition, manufacturing and service MSMEs will be outlined under a common measure that will mix investment in plants and machinery or equipment and turnover.
“The proposed definitional change for the MSME sector based on turnover is enlightened and perfectly coordinated with the GSTN framework.”
Revised MSMEs Sector Classification
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Composite Criteria: Investment and Annual Turnover |
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Classification |
Micro |
Small |
Medium |
|
Manufacturing |
Investment < Rs. 1 cr. |
Investment< Rs. 10 cr. |
Investment < Rs. 50 cr. |
How Can The Government Provide Aid To MSMEs Sector?
The government has commenced taking some moves to conduct the MSME sector, a drift. The Reserve Bank of India recently brought Long Term Repo Operations (LTRO) net amount of INR 100,000 crore to help banks increase lending at cheaper interest rates. The Finance Minister Nirmala Sitharaman has released the 6 relief measures to provide aid to the MSMEs sector.
Government Initiatives to Promote Newly MSMEs
The below discussed are the initiatives taken by the government to promote newly MSMEs
CHAMPION’s Portal: Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength
It has been perceived essential to develop a consolidated, authorized, prosperous, bundled, and technology campaign platform for aiding and building up the Micro, Small, and Medium Enterprises (MSMEs) of the country. As the name suggests, it will intend at Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength. This is fundamentally formed to make the smaller units big by aiding constraining.
Basic Objectives of the CHAMPIONS Portal
- To provide the help MSMEs sector in their difficult time such as financial help, raw materials, labour, etc.
- To provide aid to the MSMEs sector capture new chances engaging production of medical items & accessories.
- To provide aid to MSMEs sector in recognizing sparks
- It is a one stop resolution for everything in regarding MSME initiating from MSME registration to obtaining resources, taking guidance, providing suggestions and incorporating grievances.
- MSME Samadhan
- MSME Sambandh
- MSME Sampark
- Entrepreneurship and Skill Development programs
- MSME Databank
- PMEGP e-portal
- Infrastructure Development programs
Prime Minister Employment Generation Programme (PMEGP)
- CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) was initiated by the Government of India to generate collateral free credit for MSMEs sector.
Interest Subvention Scheme is for farmers of the nation. It aims to give short term credit at subsidies interest rate.
- Credit Linked Capital Subsidy Scheme for technology up gradation is a revised policy. It aims to expediting by giving technology up gradation 15% up front capital subsidy to MSMEs sector.
- Gram Udyog Vikas Yojna (PMEGP) is a self-employment scheme of the Central Government. Under PMEGP, there is a loan of amount of Rs 25 lakh for establishing industries and Rs 10 lakh for investing in the services sector. If the entrepreneurs set up industries in rural areas, then this amount of subsidy increases to 25 to 35 percent.
Who Sanctions MSME/SME Loans?
Companies incorporated under MSME can avail loans are as follows:
- Small Industries Development Bank of India (SIDBI)
- National Small Industries Corporation (NSIC)
- Regional Rural Banks (RRBs)
- Scheduled Commercial Banks (SCBs)
- North Eastern Development Finance Corporation (NEDFi)
- Other banks and NBFCs
Certain Measures Taken By Government towards Aatmnirbhar Bharat
The below discussed are the government’s certain measures to help the MSMEs sector in Covid 19 pandemic situation.
INR 3 lakh crores Collateral Free Automatic Loans for MSMEs Sector
- Debtor with amount of INR. 25 crore unpaid debt and amount of INR. 100 crore turnover are worth to use such loan
- Loans which have 4 years tenure with halt of 12 months on principal paying back.
- Interest rate to be eclipsed.
- 100% credit guarantee including to Banks and NBFCs on principal amount and interest rate.
- The aforesaid Scheme can be used till the date 31st October, 2020 – but was consequently extended by a month and was supposed to drift on November 30
- There will be no need to pay guarantee fee.
- No fresh collateral
Rs. 20,000 crores Subordinate Credit for MSMEs
- Operating MSMEs which are NPA or are emphasized will be worthy.
- Advertiser of MSME will be provided credit by banks, which will then be impregnated by advertiser as equity in the unit.
- Government will give a support of amount of Rs. 4000 crores.
- CGTMSE will give half debt guarantee uphold to the financial institution.
Rs. 50,000 crores Amount Invested in Possession Impregnated through MSME funds of fund
- FOF with the amount of INR. 10,000 crores will be set up
- Give money invested in possession for MSMEs with development and potential activities.
- FoF will be conducted through Mother fund and some Daughter funds
- It will provide help to increase MSME size as well as capacity
- It will encourage MSMEs to get recorded on main board of Stock exchanges
Rs. 45,000 crores Partial Debt Guarantee Scheme 2.0 for NBFCs
- NBFCs / HFCs / MFIs with low debt rating need convert to sanction fresh loan to MSMEs and individuals
- Enduring PCGS policy to be increased to enclose financing such as primary issuance of bonds / CPs of such entities
- First 20% of loss will be carried by the bondsman
- AA paper and below engaging unrated paper will be allowed for investment
Revision of MSME
- The investment limit to be amended skyward.
- Additional criteria of turnover being announced
- Distinguish between manufacturing and service sector to be removed.
Global tenders to be disallowed for limit upto Rs. 200 crores
- Indian MSMEs and other Companies have encountered with the biased competition from foreign establishments. Due to which, the global tenders will not be allowed in government obtainment tenders up to the amount of INR 200 crores
- It will help MSMEs to increase their business
- It will be a move towards self-reliant India and support Make in India
Other Measures
- E-market in relation to MSMEs to be advertised to act as a replacement for trade fairs and exhibitions
- Fintech will be availed to increase the transaction based oon lending using data made by the e-marketplace
- MSME debt from Government and Central Public Sector endeavoring (CPSEs) to be publicized within the 45 days
- 30,000 crores special liquidity schemes for NBFCs / HFCs / MFIs
Conclusion
Being an agile developing economy, the government should spread more alertness about the MSMEs sector and target achieving more employment, enhancing industrialization, curtailing in imports, expanding export, modernizing the technology, ambitious business activities, knowledge development wealth creation, and economic development. Incorporating and using the advantages & policies under MSMEs will aid in attaining the development and economies of scale of the nation.
Read our article: Government Announced Extension of ECLG Scheme to Attract More Borrowers under MSME
