MSME

They are tough as nails, but will do even better with more govt support

Amiti Sen New Delhi | Updated on June 26, 2020 Published on June 26, 2020

Many units are in dire need of credit and await measures to boost demand

Micro Small & Medium Enterprises (MSMEs), the backbone of the Indian economy providing employment to more than 11 crore, are putting up a brave fight against the disruptions caused by the Covid-19 virus.

With their inherent resilience, many units are slowly getting back to work as the government is phasing out the lockdown, but the need of the hour is fast implementation of the measures announced by the government to put the sector back on its feet.

“Till now, about 40 per cent of the MSME units have been able to re-start manufacturing. But they are not able to operate at more than 50 per cent of their capacity because of low demand.

The government needs to take steps to reduce the fear psychosis among people and also boost demand by putting more money in the hands of the poor through various schemes,” said Anil Bhardwaj of the Federation of Indian Micro and Small & Medium Enterprises (FISME).

The PM Jan Dhan Yojana, which credited the accounts of more than 4 crore women (the accounts were started during the lockdown period), could boost MSME demand.

So would the release of timely payments under the Mahatma Gandhi National Rural Employment Guarantee (MGNREGA) scheme.

Awaiting guidelines

The MSME sector, contributing 29 per cent to India’s GDP, is also in need of government support to tide over the crisis.

“For MSMEs, the fall in revenue will be steeper at 17-21 per cent.

A sharp decline at the operating level will also impact creditworthiness, aggravating the liquidity crunch these units have been grappling with, particularly on the working capital front,” a report from Crisil said.

While the government announced a package for the MSME sector in May, which included a ₹20,000 crore loan for stressed MSMEs and a ₹50,000 crore fund of funds for equity infusion, the detailed guidelines are yet to be out.

“We are in dire need of credit on easy terms without much paperwork. The guidelines for the government schemes need to be announced as soon as possible,” said an MSME exporter based in Noida.

Changing the definition of MSMEs and increasing the threshold limits is a move which has been largely welcomed by the sector.

Under the new definition, entities falling within the MSME sector are to be classified not only on the basis of the investment made but also turnover. The thresholds have been revised upwards for micro, small as well as medium enterprises.

The Indian industry, including FISME, had long been demanding an upward revision as the lower thresholds were acting as a disincentive for MSMEs to make more investments.

The government’s decision to take a re-look at its decision and further enhance the threshold for medium enterprises to ₹250 crore would especially help sectors such gems & jewellery and cables & conductors, where turnover is largely made of cost of raw material, pointed out FISME.

Published on June 26, 2020
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