Rescuing The Msme Sector Amid Covid- 19: An Initiative Of Government Of India
Divya Punj
1, Shivani Solanki
2, Dr. Namrata Prakash
3, Priyanka Singwal
4School of Management, Graphic Era Hill University, Dehradun, Uttarakhand, India
Email: 1Punjdivya24@gmail.com, 2 shivanisolanki124@gmail.com, 3namrataprakash26@gmail.com, 4priyankasingwal07@gmail.com
Article History: Received: 11 January 2021; Revised: 12 February 2021; Accepted: 27 March 2021; Published
online: 10 May 2021
ABSTRACT: With the aftermath of Covid 19 and severe lockdown, India now encounter the crisis of
unemployment and shut down of business specifically in the MSME sector .The motive of the study is to identify the measures taken by the Government of India to uplift the MSME sector through its Self –Reliant Indian Movement as an initiative to revive the confidence of MSME sectors by allocating a robust monetary package thereby initiating economic recovery. The paper also focuses attention on the challenges faced by the MSME sector before and after the outbreak of Covid 19 and how far the relief measures announced by the government will benefit.
KEYWORDS: MSME, Covid 19, Atma Nirbhar, Bharat Abhiyan, Economy, Slowdown, India, Structural Reform,
Challenges, GDP
I. INTRODUCTION
"Life is no different than the weather. Not only is it unpredictable but it shows us a new perspective of world everyday" This quote made more sense when the world was introduced to an unexpected way of living i.e. with the Covid-19 pandemic.
While countries like USA, Italy and Iran were already shattered even after having good health infrastructure. The advent of Covid-19 approached the doorsteps of India by inflicting 500 people and taking the lives of 12 in the wake of which Prime Minister Narendra Modi announced a 21-day lockdown on 24th March 2020 following "Janta Curfew" on 22th March 2020.
The lockdown affected all the aspects of the country but more importantly it had its direct effect on the economical aspect of India. The stability of economy of 150 countries was affected by Corona Virus with the commencement of Fiscal year 2020-21- In India, 40 million people had lost their jobs (Acc. to MRD Report), mostly in the unorganized sector. The GDP of India for the FY 19 stood at 5.6% for Q1, 5.1% for Q2, 4.7% for Q3 and 3.1% for Q4. With prolonged partial and complete lockdowns and weak GDP the unorganized sector will suffer a steep downfall and increase the problem of unemployment.
The decline in production of crude oils, fertilizers, steel, cement, electricity etc. led to a contraction of 6 percent in infrastructure industry which accounts to 40 percent of industrial production index (fall of 16.7 percent in factory output). The weak demand and reduced operational expenses reflected on the core inflation. A sharp contraction in both imports and exports was seen because of weak domestic and international demand. Total exports fell by 60 % in April from a figure of $10.36 billion in April 2019. Exports of jewelry and gems showed shrinkage of 98.7% and for textile exports contracted by 71.6%.
The sluggish growth of Indian Economy was discernible in the recent past, suffering biggest fall in the last six years. With the pandemic outbreak the additional challenges for the economy may land many sectors in deep trouble. It’s a well-known fact that India and China are one of the biggest trading partners with China playing a crucial role for India and many of its sectors. MSME is one such sector that relies heavily on China for the supply of raw material. Several issues have been encountered after lockdown was executed in China and subsequently in India. The impact of it was felt in the form of export contraction, halt in production, shortage of workforce, compressed liquidity in the market. The CAIT (Confederation of All India Traders) representing around 70 million traders in India highlighted that a majority of these traders belong to the MSMEs. Furthermore the impact of Covid 19 on trade is anticipated approximately to 380 lakh. The MSME sector was already dealing with difficult situation prior to the outbreak of Covid 19.The reasons outlined for the distress in the sector were demonetization, improper execution of GST followed by downturn in the economic growth and ultimately the biggest one–COVID-19 that further intensified crisis in this sector.
for the revival of the economy. On 12th May 2020, Prime Minister Narendra Modi announced the "Aatma Nirbhar Bharat Abhiyaan" or "Self-Reliant India Mission" economic package. Major stimulus measures have been introduced in the four trenches of the package.
First trench of Aatma Nirbhar Bharat Abhiyaan was announced as a 20 lakh crore economic package (which constitutes to approx. 10% of the total GDP). The major postulates of the declaration included the key focus areas namely Land, Labor, Liquidity and Laws. The relief package was to infuse a new life in cottage industries, MSME”s and industries and to cater laborers and middle class, this was declared in the address to the nation. The concept was defined as self-reliant India that can produce internationally accepted goods locally, so the aim is to increase the presence of Indian products globally and not to isolate Indian economy from the world.
The atmanirbhar abhiyan talks about 5 pillars of self-reliant India and MSME’s have a major role in strengthening all the five pillars namely Economy, Infrastructure, technology driven system, vibrant demography and demand because: Standing next to agriculture in terms of employment generation, a huge potential lies in this sector, and this is the reason why National Manufacturing policy contemplated a possibility that such MSME’s can contribute 25% of the total GDP from manufacturing by the end of year
2022,
These measures include the changed definition of MSMEs. Previously an enterprise with investment up to Rs25 lakh was called a micro unit. Under the new definition, a firm up to investment of Rs. 1 crore is to be called micro unit, of Rs 10 crore is to be called as small unit and investment greater than Rs.20 crore will be called as medium unit. Under new definition, a firm with turnover of Rs. 5 crore is to be called a micro unit; Rs.50 crore will be called a small unit and turnover greater than Rs.100 crore is to be called as medium unit. Rs. 3 lakh crores collateral free Automatic Loans for Businesses including MSMEs.Rs.20,000 crores subordinate debt through MSME fund of funds. The MSME plays a pivotal role in the growth of Indian economy as this sector employ to over 114 million people and contribute more than 30 percent in the GDP. Considering it as one of crucial segment of the country the government of India came out with an immediate action plan “Atma-Nirbhar Bharat Abhiyan” (ANBA) that addresses the needs of MSME sector and paves way for its long run survival and Profitability.
II. OBJECTIVES
▪ To identify the Role of MSME in Indian Economy
▪ To Highlight the Challenges faced by the MSME Sector before and after the outbreak of COVID- 19 in India.
▪ To understand the COVID relief measures announced by the Government of India to uplift the MSME sector and make it “Atmanirbhar.”
▪ To suggest Specific measures to improve the outcome of the Atma Nirbhar Bharat Abhiyan
III. METHODOLOGY
This paper highlights the contribution of MSME sector in the Indian economy and focusing attention on the challenges encountered by the MSME segment before and after the outbreak of the COVID -19 epidemic .Furthermore the emphasis is also on the measures announced by the government to revive the sector .The data in relation to this has been collected primarily from the secondary sources including the published sources such as Annual report of Ministry of MSME, data by Central Statistics Office, Ministry of Statistics & Programme Implementation, RBI & Press Information Bureau/Directorate General of Commercial Intelligence and Statistics. (DGCIS), data released by CIBIL, Report of Regional development Bank, press release of various news agency etc
IV. MSME AT A GLANCE: PRIOR TO CORONAVIRUS OUTBREAK IN INDIA
MSME SECTOR GROWTH (THE NUMBERS TO PROVE THE RELEVANCE OF MSME’s IN ECONOMY
It’s a world known fact that the growth of MSME’s ensures balanced development of an economy (Rural as well as urban). The limited capital requirement ensures development of these enterprises in all the geographical areas thereby generating employment in both rural and urban areas. In alignment to this statement, statistics show that MSME’s account for 50% of employment and 90% of business throughout the world.
infrastructure, limited market etc. MSME’s have continued to flourish and become rising star of Indian Economy by performing well in terms of exports, quantities produced, product quality, and employment generation. MSME’s are producing a diverse range of products which are suitable for both domestic and international markets. Entrepreneurship goes long way in making a nation self-reliant by creating a synergy force through increased domestic production and employment generation. MSME’s are the actualized forms of innovative business ideas.
4.1 Contribution in GDP:
As per the Annual report Ministry of MSME (2018-19), the data by Central Statistics Office, Ministry of Statistics & Programme Implementation, the contribution of MSME’s in GVA & GDP of country for past few years is as follows:
Table III: Contribution of MSMEs in Country’s Economy at Current Price (in ₹ crore) Year MSM E GVA Grow th (%) Total GVA Shar e of MSM E in GVA (%) Total GDP Share of MSM E in GDP (%) 2011-12 2622 574 810694 6 32.35 873632 9 30 2012-13 3020 528 15.17 920269 2 32.82 994401 3 30.4 2013-14 3389 922 12.23 103631 53 32.71 112335 22 30.2 2014-15 3704 956 9.29 115042 79 32.21 124679 59 29.7 2015-16 4025 595 8.65 125666 46 32.03 137640 37 29.2 2016-17 4405 753 9.44 138415 91 31.83 152537 14 28.9 Source: Annual Report Ministry of MSME 2018-19
From this data it can be said that the share of MSME’s in GDP has been close to 30% for a significant time.
4.2 Employment Generation:
As per Asian Development Bank (ADB 2015) Report the percentage of employment generated by SME’s in few Asian Economies ranged from 32 to 88%. A study conducted by National Sample Survey for a period 2015-16 the MSME sector generated 1109 lakh jobs (360.41 Lakhs in Manufacturing, 387.18 Lakh in Trade. 362.22 Lakh in other services and 0.07 lakh in Non-Captive electricity generation and transmission).
4.3 Exports by MSME are in relation to Total exports:
Since year 2012 the MSME sector has been contributing more than 40% in the total exports. The total exports declined in the year 2015-16, so did exports from MSME’s. Year 2016-17 and 2017-18 showed a growth in terms of both total exports and MSME’s exports.
-20 -10 0 10 20 2013-14 2014-15 2015-16 2016-17 2017-18
Growth in total exports and exports
by MSME's
GROWTH/DECLINE IN TOTAL EXPORT (%) GROWTH/DECLINE IN MSME EXPORTS (%)
Table IV: Share of MSMEs in total exports
(Amount in USD Million)
Year Total Export s Exports by MSME Share of MSME Export s *(%) 2012-13 300400 127992 43 2013-14 314415 133313 42 2014-15 310352 138896 45 2015-16 262291 130768 50 2016-17 275852 137068 50 2017-18 303376 147390 49
*Values rounded off
Source: RBI & Press Information
Bureau/Directorate General of Commercial Intelligence and Statistics. (DGCIS)
Table V: Growth in total exports and exports by MSME's Year GROWT H/DECLI NE IN TOTAL EXPORT (%) GROWTH/D ECLINE IN MSME EXPORTS (%) 2013-14 4.67 4.16 2014-15 -1.29 4.19 2015-16 -15.49 -5.85 2016-17 5.17 4.82 2017-18 9.98 7.53
Source: RBI & Press Information Bureau/Directorate General of Commercial
V. MAJOR CHALLENGES FACED BY MSME SECTOR: 5.1 Challenges before COVID 19
5.1.1 Despite of the data available about MSMEs through GSTN, Income tax data base, Udyod adhar portal, there is
no single platform to furnish the lenders with adequate information about the borrower’s financial condition.
5.1.2 Timely due payments, infrastructure creation, formalizing the sector, ensuring adequate credit supply are some
key areas where government is emphasizing upon to bring reforms. Government intervention on both supply and demand side is needed.
5.1.3 Creating MSME’s clusters (placing the enterprises with similar or complimentary production, using same level
of technology and common opportunities and risks) is by large an initiative of government and lacks private investment. Private investment in developing such clusters is needed to make them competitive.
5.1.4 Lack of arrangements like tool rooms, innovation hubs, rural broadband, electricity, product testing laboratories,
work sheds is a major hurdle in the way of MSME’s to become key players in domestic and international markets. A strong infrastructure will go a long way in supporting the growth of MSME’s.
5.1.5 For any sector to utilize the benefits of government policies and schemes it is essential to formalize the sector.
For MSME’s first step towards formalizing is digitalization of these enterprises and getting registered under Udyog Adhar Memorandum (UAM). Lack of information leads to missed opportunities. The government policies, credit facilities, market opportunities are not known to the enterprises because of an unstructured system.
5.1.6 Through market assistance schemes, NSIC help MSME’s to find new markets for their products. MSME’s can
sell their products to PSU’s and government departments through (GeM) Government e Market place, but until June 2019 only 38,609 MSME’s were registered on GeM Portal. Therefore proving that very limited enterprises are able to reap the benefits of government policies because of lack of information which is an end result of a not formalized setup.
5.1.7 The innovative business ideas need to be actualized and given a shape of enterprise by creating a structured
MSME eco-system.
5.1.8 For a very long time there has been a need to redefine the MSME’s. The previous definition of MSME’s had a
very low threshold limit because of which such enterprises were able to reap the benefits under this classification for a very limited time and were then vulnerable to the cut throat competition in the market and threat of perishing because of not being able to compete with big business units. Many MSME’s didn’t tried to grow because of the fear of losing the benefits under this category.
5.1.9 The lack of funds (liquidity) is the biggest problems faced by MSME’s, banks are already suffering from huge
NPA’s and therefore despite of various initiative by RBI to extend credit to MSME’s, banks are reluctant to give loans to such enterprises. Further lack of liquidity in NBFC’s prevent them to help MSME’s as well. The fact that equity funding in these enterprises is still not available, these enterprises are unable to match industry standards and compete with global firms because of lack of funds.
5.1.10 Because of the reasons mentioned the sector is informal, unstructured, underfinanced and prone to threats like
cyclical shocks, lack of demand, untimely payments and the efficiency of global markets is further putting these enterprises under the threat of existential crisis.
VI. COVID 19 CHALLENGES FOR MSME SECTOR
MSME sector was already going through distress because of the before mentioned challenges and adding to their misery the world economy is hit by a pandemic. The pandemic is not only a threat to lives of people but also to their livelihoods. Over 100 countries imposed partial and complete lockdowns to control the spread of the disease, but the economies had to suffer because of these lockdowns. The shock wave travelled to MSME’s as well.
The nationwide lockdown not only halted the production and lead to a sluggish demand, but several fixed (uncontrollable) costs increased the expense side of the enterprises when the revenue side was at a standstill. A huge part of urban and rural population is dependent on these MSME’s for employment, so with a lockdown of more than eight weeks, not only the enterprises are suffering but many people are facing a threat of losing their jobs. Liquidity is a major challenge for MSME’s, therefore with extended lockdown and no operations the enterprises are not in a position to pay its employees.
India imports 16% of its total needs from China. (90% of Indian medicines, 80% medical equipment’s, 30% automobiles, 90 % toy market, 50% of bicycle market etc.). The raw material for many MSME’s is sourced from China (Example: 75% of medical ingredients), and because China was under a complete lockdown many MSME’s suffered from low production because of lack of raw material. In reflection to this the trade impact on India is estimated to be around 380 lakhs and chemical sector is expected to suffer by Rs.12, 90, 00,000.
New challenges like halt in production, unavailability of labor/manpower, falling consumption, Lack of liquidity, rising fixed cost will further magnify the problems faced by MSME’s.
VII. ATMA NIRBHAR BHARAT PACKAGE FOR MSME SECTOR 7.1 Change in the definition of MSME’s:
The RBI declared constitution of an expert committee in Fifth Bi-Monthly Monetary Policy statement (2018-19), dated 5th December, 2018. After this declaration a committee of experts was constituted chaired by Shri V K Singh
(former chairman, Securities and Exchange Board of India). This Committee studied the defining criteria of MSME’s which are being used worldwide. The World Bank defines MSME on three criteria: annual sales, asset size and employment strength.
Every economy uses a different parameter to define MSME’s suiting their economy, according to an IFC report (2014), around 155 economies used 267 different definitions. In this study it was discovered that the commonly used parameters were employee base (92%), turnover (49%), value of assets (36%), other parameters like loan amount, years of experience, technology, manufacturing capacity and initial investment were used in 11% of definitions. The chart below shows the number of countries according to the criteria used for defining MSME’s:
105 18 52 75 3 5 3 10 0 50 100 150 EMPLOYEES EMPLOYEES &… EMPLOYEES &… EMPLOYEES,… TURNOVER ASSETS &… ASSETS OTHERS
Defining criterias of MSME's
Table VI: Number of countries by their definition of MSME's CRITERIA NUMBER OF COUNTRIES EMPLOYEES 105 EMPLOYEES & ASSETS 18 EMPLOYEES & TURNOVER 52 EMPLOYEES, TURNOVER & ASSETS 75 TURNOVER 3 ASSETS & TURNOVER 5 ASSETS 3 OTHERS 10
The first declaration in the first tranche of the Atmanirbhar Abhiyan was regarding the change in definition of MSME’s. Until May 2020 MSME’s were classified and defined based on investment on machinery and equipment, this criteria was decided back in 2006 (Section 7 of MSMED Act 2006) when the Act was passed and therefore it didn’t reflects the current increase in price index. The lack of adequate accounting records makes it difficult to ascertain the investment in machinery plant & equipment so a new parameter of turnover was suggested by the committee. With few changes in the recommendation the definition proposed by the committee has been accepted. The parameter of turnover is incorporated in the new definition and the prior distinction between manufacturing and service enterprises has been slashed. Tough widely used it’s still a challenge to implement the employment based definition
PREVIOUS MSME's CLASSIFICATION CRITERIA: INVESTMENT IN PLANT &
MACHINERY/EQUIPMENT CLASSIFICATI
ON MICRO SMALL MEDIUM
MANUFACTUR ING ENTERPISE INVESTME NT < Rs. 25 Lacs INVESTME NT < Rs. 5 Crore INVESTME NT < Rs. 10 Crore SERVICE ENTERPRISE INVESTME NT < Rs. 10 Lacs INVESTME NT < Rs. 2 Crore INVESTME NT < Rs. 5 Crore
NEW MSME's CLASSIFICATION
CRITERIA: INVESTMENT AND ANNUAL TURNOVER (MANUFACTURING AND SERVICE)
CLASSIFICATI
ON MICRO SMALL MEDIUM
INVESTMENT INVESTME NT < Rs. 1 CRORE INVESTMEN T < Rs. 10 Crore INVESTME NT < Rs. 20 Crore ANNUAL TURNOVER TURNOVE R < Rs.5 Crore TURNOVER < Rs.50 Crore TURNOVE R < Rs.100 Crore
For a very long time there has been need to redefine the MSME’s. The previous definition of MSME had a very low threshold limit because of which such enterprises were able to reap the benefits under this classification, because of which though in the condition to expand the enterprises were reluctant to expand their business. The new definition (Table II) is feasible because after the implementation of GST the information about turnover of an enterprise can be retrieved through GSTN. Therefore, definition based on turnover will be easy to implement and by removing the distinction between manufacturing and service enterprises the biasness towards manufacturing sector can also be controlled.
7.2 Remedy for delayed payments:
The operational efficiency of MSME’s is bothered by the lack of liquidity because of extended Working Capital Cycle. The payments are delayed by the procurement organizations (corporate and government bodies/ PSU’s). MSME’s are supporting and ancillary units for the big corporate houses. Such big corporations operate with MSME’s on credit bases and when invoices are not cleared on time the enterprises face liquidity crunch therefore hindering the smooth functioning of these enterprises.
MSME’s are not in position to fight legal battles against these big corporate houses. According to CMIE data the average debtor days has been more than 90 days which can go up to 280 days (data for the year 1997-2018). To resolve this problem it has been declared in the first tranche of atmanirbhar abhiyan that to ensure the liquidity in small companies it has been made mandatory to clear the payments of such companies within 45 days.
7.3 Financial aid to MSME’s
7.3.1 Sovereign loan scheme: For the growth of MSME sector the availability of credit at a reasonable cost is
necessary. The sovereign loan scheme, which is expected to benefit 45 lac MSME’s, under which loans worth 3 lac Crores will be given to MSME’s without any fresh collateral. The government will act as a guarantor (100%) for these loans. Therefore, Banks and NBFC’s will not fear the threat of loans becoming NPA’s. MSME’s with a turnover of less than 100 crores can avail these loans up to 20% of their outstanding debts. The period of the loan will be 4 years with first one-year moratorium.
For a very long time banks have been reluctant in extending loans to MSME’s because of huge NPA. Despite various schemes being announced by government the banks are reluctant in giving credit to such enterprises. According to March 2019 data provided by commercial banks to RBI, approximately 17.4 trillion is the value of credit outstanding to MSME’s by banking sector (90% of which is extended by schedule commercial banks). From the NPA data released by CIBIL for the year 2016-18 it is evident that because of high risk in lending banks are reluctant to lend to MSME’s. Lack of adequate information about MSME’s makes it difficult for banks to ascertain creditability of MSME’s:
NPA in different Segments SEGMEN T MID LARG E SME MICRO SEP’16 15.20 % 12.90% 10.60 % 8.60% Dec’16 15.90 % 14.70% 11.30 % 9.20% Mar’17 16.30 % 15.30% 11.40 % 8.90% Jun’17 16% 16.50% 11.20% 8.90% Sep’17 16.90% 17.10% 11.40% 8.70% Dec’17 16.60 % 18.60% 11.50 % 8.80% Mar’18 16.60 % 19.90% 10.90 % 8.30% Jun’18 18.00% 20.00% 11.10% 8.60% Sep’18 18.40 % 20.00% 11.30 % 8.50%
7.3.2 Stressed MSME’s:
The SMA’s (Special Mention Accounts) are the ones with delayed interest payments. SMA0 where delay is between 0 to 30 days. SMA1 where delay is for 31 to 60 days and SMA2 where delay is between 61 to 90 days and beyond 90 days the account is called NPA, but government has categorized such MSME as stressed assets and no such unit will be termed as NPA until March 2020, a subordinate debt of 20,000 crores has been provided for such stressed units. These are the units with potential but need capital for survival. The subordinate debt will be paid back only after the bank loans will be paid. 2 lac MSME’s are projected to benefit from this scheme.
7.3.3 Fund of funds: A fund of funds that will operate through a mother fund and a few daughter funds will help
leverage 50,000 crores through daughter funds. The idea behind creating such revolving fund is that its value multiplies significantly over a period of time.
7.3.4 Tenders Reserved: Global competitors will be disallowed for government procurement tenders up to 200 crore.
This will help increase demand for products produced by small domestic enterprises. VIII. FINDINGS AND SUGGESTIONS
Smart are those who learn from other people’s failures and success. The constitution of India, GST and many great reforms were a result of exemplifying the economies which were doing well in those areas. We We need to formalize the MSME sector to reap maximum benefits from the sector and replicating the models, plans and policies can go a long way in making the sector efficient .Below are some global best practices that can be inculcated to shape our MSME sector:
GLOBAL BEST MSME PRACTICES
COUNTRY BEST PRACTICES
UNITED STATES
Small Business Administration (Nodal Agency) for development of MSME's
ITALY Cluster Development
COLOMBI
A Equity Financing
TURKEY
SME academy provides training and workshops for human
capital development
BRAZIL
Government tenders up to R$ 80,000 are granted to small and
micro enterprises Credit guarantee companies and
0.00% 5.00% 10.00% 15.00% 20.00% 25.00%
NPA in different Segments
If we take a close look at these best practices it sums up the needs of our MSME sector. Lack of formalization costs the sector in terms growth, development, lack of credit from formalized institutions etc. A formalized system ensures availability of information about all MSME’s units (including the nature of business, location, and other features), which helps in formulating adequate policies.
In the absence of a single registration the dependency on survey data increases for getting information about MSME’s but surveys are infrequent and the data collected through surveys is unreliable. Many direct benefits were associated with registration under MSMED Act 2006 to promote the process of registration but not much was accomplished. MSME’s have to register under various bodies which makes it tedious and multi layered.
The major hurdle towards single window registration process is the lack of a common identifier. Both GSTN and UAM use PAN information. Udyog Adhar a user friendly electronic platform had 68.89 lakh MSME’s registered on it (as on June12, 2019), but the data is self-verified and therefore not authentic so cannot be used by lenders and creditors. Countries like New Zealand, Canada, and Norway etc. have been using Unique Business Identifier (UBI). Taking examples of such countries the plan of using PAN as a Unique Enterprise Identifier (UEI), and a common registration window will ensure better tax compliance, better business environment, better government support, reduction in size of informal economy (by sharing data with multiple agencies).
To make policies more aligned and agenda specific the ministry of MSME should be the empowered ministry for introducing schemes for MSME’s. The schemes formulated should touch the points namely: ease of doing business, policy governance, creating a market, infrastructure development, technological enhancement, cluster development, dissemination of knowledge, skill and human capital development, access to finance
IX. LIMITATION:
The data available is secondary and therefore had to be molded according to the study. The policies are just declared and therefore it’s not possible to measure their impact on the MSME’s. Further, The study does not talks about the impact and shortcomings in the existing policies.
X. CONCLUSION
Converting threats into opportunities is a strategic measure. Atmanirbhar abhiyan is also a strategic measure through which Government of India has tried to initiate the much needed changes. MSME though a major contributor in the Indian economy was going through a rough time before COVID-19 outbreak and the pandemic just added to the worsening conditions. The relief package declared should be taken as a first step towards bringing a structural reform in the sector. The sector has a huge potential, MSME’s can contribute 25% of the total GDP by the end of year 2022. With a widespread network of 63.38 Million enterprises, MSME’s contribute more than 40% of exports,
28% of GDP, 45% of manufacturing output and generates employment for 111 million people. MSME’s can prove to be a major element in making India self-reliant if continuous progressive measures are taken.
Theoretical Framework:
Structural reform is the need of the hour. The Atmanirbhar Abhiyan will give a boost to the sector and the below mentioned reforms will help strengthen the five pillars of Self Reliant India. Once the sector is formalized it will be easy for the competent authorities to formulate agenda specific policies that can cater to the need of MSME ecosystem with competitiveness and sustainability at the center.
Structural reform is the need of the hour. The
FORMALISED SECTOR
Single Registration Process
Ministry of MSME as a Nodal Agency
Collection of authentic data and its
dissemination
Policy formulation for MSME
Infrastructural Development
Transportation and telecommunication facilities
Supportive facilities: tool rooms, testing labs, warehouses
Cluster development
Technological Enhancement
Research and Development
Incubators
Capital intensive production
E Markets
Human Capital Development
Access to finance
Skill development programs
Simplification of loan application
Cash flow and trade receivables based lending
Technical assistance
Financial and industry specific literacy
Cap on interest rates
Training and workshops
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