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By Aman Kaushik

MSMEs stands for micro, small and medium enterprises. All those enterprises whose investment is not more than 1 crore and turnover more than 5 crore fall in the category of micro-enterprises, whose investment is not more than 10 crore and turnover 50 crores are considered small enterprises and those with an investment of 50 crores and turnover about 250 crores fall into the category of medium enterprises. W.r.t revised classification effective from 1 July 2020.

The term 'MSME' has always been a highly flamboyant and potent industry in India and continues to escalate by a rate of 10% annually. It has helped save India’s economy during the 2008 recession and even today contributes to around 6.11 % to India’s GDP by providing employment to around 120 million people and engaging 36.1 million units of MSMEs.

The coronavirus pandemic has ravaged the world economy, claimed the lives of many and uprooted many businesses with the worst hit being the MSMEs in India. These industries are more vulnerable to damage since bigger companies have big buffers to protect their interests. The PM has stated that there will be a crunch in cash flow within the economy which will further add pressure on the economy. MSMEs usually function on a day to day transactions which include transporting of goods, raw materials and other commodities on a day to day basis which was rendered out of the question owing to the lockdown. The impact of the lockdown has been severe for the MSMEs. Migrant workers on the roads have substantiated this fact. Also, according to a survey conducted by All India Manufacturers Organization (AIMO), 71% of businesses were not able to pay salaries in March. In the past also, the MSMEs were the ones along with the daily wage labourers who bore the harsh brunt of the implementation of demonetization and GST. 

To help the MSMEs, the Reserve Bank of India (RBI) had announced some measures in April 2020. This was the first time after the lockdown was imposed that MSMEs were considered for assistance programs. The measures introduced were:

• Cut in the policy repo rate to 4.4% (lowest till date).

• Injecting rupee 3.75 lakh crore worth of liquidity in the economy.

• 3 months moratorium on payments of instalments on existing loans.

• Rupee 50000 crores in refinancing NABARD, SIDBI and NHB.

• On ad hoc basis, low-interest loan rate of 5% withing 48 hours by public sector banks dehors collateral and minimum paperwork

The minister for MSME Nitin Gadkari consensus ad idem RBI, also announced that measures are being taken for creating Agro MSME policy which will help include entrepreneurship and employment in rural and tribal areas.

Schemes of MSME:

• Udyog Aadhar Memorandum

Udyog Aadhar is a 12 Digit Unique Identity Number created for all enterprise individuals by the government. The Benefit one gets through this scheme is that Availing of Credit, Loans, and Subsidies from the Govt. gets easier.

• Zero Defect Zero Effect

For exporting the goods certain guidelines are to be followed and certain Standards relating to exports are to be followed else the goods would be returned back so in this case, the government has introduced this policy in which the exported goods are eligible for some concessions and money returns.

• Quality Management Standards & Quality technology tools

This Policy is developed to enhance the learning and adapting of better Management standards and using better tools in their work for better efficiency and betterment of work. Regular seminars or sessions are organized in which the Enterprises are made to learn about new Technology to sensitize their Businesses.

• Grievance Monitoring System

This is a portal made by the ministry for people to register their complaints and suggestions.

• Incubation

A new Business Plan, Idea or a Product Design can be worked out under this scheme as government can fund up to 75-80% of the project Cost for promoting new and better Ideas in the market

• Credit Linked Capital Subsidy System

A business owner can avail subsidies directly in their current bank accounts. This is the new system where the business owner can avail the subsidies directly from the bank rather than the previous systems where they had to run to the Government offices for availing the benefits of such schemes.

• Woman Entrepreneurship

The Government of India and the department of MSME tends to motivate women, entrepreneurs, by availing them various opportunities, such as the provision of capital, enabling subsidies, giving lesser Tax rates, Counselling and selling groups which will help to manage and expand the business owned by women. The working of MSMEs has led to a growth in the economy and the GDP rate and is expected to increase more. As the Government of India is enabling more units to work by providing several schemes, they are even promoting local manufacturing/ services under the Make in India Initiative and the Vocal for Local plank. Massive growth in the  GDP rate was expected in the India Economy from around 8% in 2015 to 15% by the year 2020 as the focus on MSME was increased and skill development was initiated across the country. Indian MSME’s are also contributing to the exports with the help of the Government with small units selling their products in the global market. The government is incentivizing any investments and outputs by large players and their MSME vendors to indigenize and/or enable import substitution particularly adapting to research and development, innovation, and global technologies. The Government of India opened various skill development centres through which many people have got access to learn new skills and further start their own enterprise through which they can earn and enhance their skills.

Initially, the number of MSME’s operating within the country was very low as setting up an MSME involved a tedious procedure with high operating costs.  those times the availability of goods was limited but due to amendment in various policies and increasing the Opportunities provided several Investments were put up to start MSME units and work of their skills, this led to a boom of local businesses and enabled many to work, an increase in the supply of local goods could be seen in the market due to increase in the working of the MSME.

Through the years MSME’s have flourished as they have received various benefits and backing from the government of India in terms of capital investment, subsidies, taxation benefits, platforms to exhibit their product(s), and facilitating the unit owners with better technology. Hitherto, the share of MSME was quite low in terms of benefaction to the economy whereas if we see it now the MSME’s contribute greatly to the nation’s economy. Around 63.4 million MSME units are operational around the country, with almost 120 million people put to work, 45% exports are accounted for by the MSME’s of the country. The MSME’s have a growth rate of more than 10% annually and have contributed significantly to the national GDP/ economy.

As the COVID-19 pandemic hit the world and led to the predicament of economies of many countries including India, led to the government of India and finance ministry making desperate efforts to revive and improve the graph.
Following this, the government announced several schemes sucha as  ‘Atma Nirbhar Bharat’. It is an initiative started by the government of India to promote the local goods through the ‘Vocal about Local’campaign. Under this scheme, the government of India would provide relief packages to various working units and workers. A total of rupees 20 Lakh Crore (20,00,00,00,00,00,000) is being made available to the various sectors of the economy to bring the Indian economy back on track. Of the total amount, around 3,70,000 crores are kept aside for MSME’s in the First Plan. The basic definition of MSME’s has been changed by the government under this scheme as they changed the Investment and turnover requirements to fall under the category of MSME’s. Now nay Business can avail a loan of Rs. 3,00,000 for a business setup without keeping collateral. Business with up to 25 crores Outstanding and have a turnover of Rs. 100 Crore are eligible. As the MSME’s are adversely affected due to this pandemic induced lockdown MSME’s are finding it difficult to sustain themselves without adequate credit support. A Sum of Rs. 20,000 crores is being set for MSME’s which are under debt pressure as this would help the MSME sector to grow multifold and this would be counted as Subordinate debt. The government even Published that it would fast track all the payments which are to be done to MSMEs from the government. E-commerce has been enabled to the MSME’s so that they can sell online. Whereas the government even set up a Fund-to-Fund equity infusion for MSME’s this would be done to help and extend the operational capacities of MSMEs.

The ‘Atma Nirbhar Bharat’ Abhiyan (scheme) is portrayed by the government as a major fiscal policy and relief package to assuage India’s economic predicament with a special accentuation on MSME revival. But you can do this reclassification under the scheme which is finally trying to resuscitate its economy after the pandemic and is also facing the brunt by the ban of Chinese products.

MSMEs employ a large workforce all over India but still hold a secondary status within the country. Ostensibly brought in to create 5 crore job opportunities and refine the business scenario for Indian enterprises these new limits have propounded a major change to the classification of MSMEs. Even though the MSME sector has been facing a credit crunch even prior to the pandemic owing to the flatlining economic curve of India but the present situation has frozen its credit flow. Another factor that should have been considered is the MSME player’s exposure to the share market to raise capital for business expansion. Lack of Equity capital restricts the growth momentum of MSME delaying the market opportunities in an increasingly competitive global market. To really thrive MSME players operate in an informal manner and need support in terms of infrastructure.

While the current apparatus will ensure adequate flow of credit, a major obstruction that the MSME sector is facing is that this is not entirely a novel initiative. The majority of the MSME sector comprises the micro players who do not have the experience or resources, to use bank finance or engage in product promotion to ensure adequate returns. The current package and reclassification are not sufficient to recuse the MSME sector from the assaults of the COVID-19 pandemic and the ban on the Chinese products along with a hugely decreased demand of non-essential commodities which are majorly produced by this industry The #RebootIndia campaign will not succeed  A Fortiori until the entire ecosystem for micro players within the MSME sector is simplified to encourage even the less educated and experienced to venture into initiating a business. The compliance framework at present is far too elaborate. While conceptually it is a commendable idea, and it has simplified interstate business, the fact remains that it has mushroomed paperwork. Small players usually do not have the required documents nor do they have the capital to get the expertise.
The government should. therefore, extend the investment bracket to provide more back-end services to improve the performance of the MSME segment which are suppliers for big industrial houses. This sector also suffers from a lack of technology-based production activities. Without technological advancement and low investment in R&D activities, the sector cannot become competent. Globally available technology should be also be subsidised by the government.

Despite the many issues that the sector is facing, a committed credit provision, simpler compliance framework and technology up-gradation will succeed in #rebootingindia as manufacturing units contemplate shifting their operations from China to India. The government should make the best out of the worst and act ex aequo et bono.

WEBLIOGRAPHY

• Covid and MSME. (2020. May 6). Retrieved from https://indianexpress.com/article/opinion/editorials/covid-msme-economy-6395652/

• Covid-19 impact on MSMEs and its significance on economic revival. (2020, May 6) retrieved from https://kredx.com/blog/covid-19-impact-on-msmes-its-significance-on-economic-revival/

• Summary of announcements: Aatma Nirbhar Bharat Abhiyaan, (6 July 2020). retrieved from https://www.prsindia.org/report-summaries/summary-announcements-aatma-nirbhar-bharat-abhiyaan

• India’s policies have incentivised firms to remain micro & small: ILO, (16 July 2020) retrieved from
  https://economictimes.indiatimes.com/small-biz/sme-sector/indias-policies-have-incentivised-firms-to-remain-micro-small-ilo/articleshow/69869190.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst 

• MSME Policy, (2020, July 16) retrieved from https://msme.gov.in/sites/default/files/MSME%20Policy%20final%20document.pdf

• Impact of COVID-19 pandemic on Micro, Small, and Medium Enterprises (MSMEs): (2020, July,16) retrieved from https://www.microsave.net/2020/06/04/impact-of-covid-19-pandemic-on-micro-small-and-medium-enterprises-msmes-india-report/