MSME the Growth Engine of New India

MSME has emerged as the growth engine of the economy, having 6.33 crore enterprises, and contributing 30 percent of the nominal GDP and 48 percent to exports.

The enterprises are classified into two divisions:

·        Manufacturing enterprises – engaged in the manufacturing or production of goods in any industry.

·        Service enterprises – engaged in providing or rendering services.

 

Benefits

1.      Cheaper bank loan without collateral

2.      Low-cost ISO certification

3.      50% subsidy in Patent & Trademark Registration

4.      Tax allowances

5.      Electricity Bill concessions

6.      Exclusive Government tenders for MSME industries

7.      Reduced set up cost.

8.      Preference for approval of Govt License & certifications.

 

How can MSME Survive after Covid?

The government had already initiated numerous measures under Atmanirbhar Bharat Abhiyan. The measures include Rs 20,000 crore subordinated debt for MSMEs and Rs 50,000 crore equity infusion through MSME funds of funds.

MSMEs also benefited from Emergency Credit Line Guarantee Scheme (ECLGS) and collateral free automatic loan for businesses has been a major support to the sector.

Challenges

MSMEs are unable to avail the measures of loan disbursal owing to the amount of paperwork, documentation, non-existing credit history, especially for a first-time borrower.

The cost of compliance, covering all licenses, and complex taxation take a huge toll on the enterprises. The challenges of running a business amidst pandemic add further complications to the sector.

Way Forward

The sector will benefit if changes happen, making credit and capital easily accessible to MSMEs. The lending ecosystem therefore needs to be eased and strengthened by leveraging digital technologies for a seamless lending process and for assessing credit risk of potential borrowers.