The Micro, Small, and Medium Enterprises Sector (MSMEs) plays a vital role in shaping the economic structure of India with low investment and generates enough employment opportunities in the country giving a wide range of products and services in the Indian market. It also contributes significantly in terms of Gross Domestic Product (GDP) and Exports. But recently after the major outbreak of pandemic COVID-19 in the country these MSMEs are suffering an unexpected break-in major operation creating a situation of panic. The government of India realized the importance and active role of MSMEs came forward to help them out after the completion of 3rd phase of lockdown on 17th May 2020.
The Hon’ble Prime Minister in collaboration with the Ministry of Finance announced a huge budget of Rs 20 lakh crore for taking India’s vast MSMEs sector back on track. This budget includes collateral free loans up to 3 lakh crore backed by a government guarantee to the 45 lakh MSME units to resume business activity. The real condition after the COVID-19 crisis of these industries was vulnerable and to meet the working liabilities they needed more funding to buy the raw material and restart the business. In this course of announcing this relief budget, our Chief economist at care ratings pointed out “While the 3 lakh crore would have flowed in the normal course from banks, the advantage here is in terms of the cost being capped, term being fixed with the moratorium and more importantly guaranteed by the government itself”.
The union finance minister also declared a change in the definition of MSME which had not been done after the enactment of the MSME Development Act 2006 because the existing low threshold in the definition of MSMEs has developed a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow. But under the rectified meaning of MSMEs, the investment limit had revised along with the introduction of add up criteria of turnover and elimination of the distinction between the manufacturing and service sector. The manufacturing and services firms whose investment is up to 1 crore and turnover is of Rs 5 crore will be introduced as micro, investment of up to 10 crores and turnover of up to Rs 50 crore will be small, and the last unit with the investment of up to Rs 20 crore and turnover of Rs 100 crore will be introduced as medium enterprises. In addition to this information, Sharad Kumar Saraf, President, Federation of Indian Export Organization (FIEO) also said disallowing global tenders will further give an impetus to the domestic MSMEs sector in line with aim of Make in India campaign.
On the other side Federation of Indian Micro and Small & Medium Enterprises (FISME) is disappointed with this decision of the government as their president Mr. Anivesh Saxena states that the industry is in a critical condition and needs immediate help to survive in the market and the credit guarantee will also be able to back in strength when the industry is back on its feet. There is a legit fear that the banks which are being used as a gateway to distribute the fund divide by the government will not release the loans to MSMEs easily as they also require some guidelines to be fulfilled by the loan takers but the industry or the units indulged in manufacturing and services are providing business a quick boost up to be back on stability. This will go about as beginning seed cash for these little undertakings hit by zero income because of the national lockdown. This credit will aid them in purchasing crude materials, cover introductory tabs and every day wages to workers. To put it plainly, this will resemble stirring capital for turning up their organizations once more.
Banks, however, flushed with reserves, have shown reluctance to loan to this classification of borrowers as they dread that the cash won't be reimbursed. These independent ventures have additionally vowed their advantages from now on for different credits and don't have further resources to vow. Banks are presently expected to be progressively agreeable in helping this class of borrowers on the grounds that the hazard is zero (since the credits are ensured by the focal government). A halfway credit ensure conspire has been stretched out to allow advertisers of these units to expand their value.
A sum of ₹20,000 crores will be channeled through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) whereby banks will loan cash to advertisers which can be mixed as value in their organizations. Around two lakh focused on MSMEs with non-performing resources (NPAs) are anticipated to profit by this. The CGTMSE will offer a halfway credit assurance to banks. There is additionally a proposition to implant value into MSMEs through a Fund of assets framework where the legislature will give ₹10,000 crores as starting corpus of the Fund. This will be utilized to raise ₹50,000 crores which will be used to help MSMEs in urgent need of value through 'girl assets' of the principle Fund of assets. The point is to grow the size and limit of the MSMEs with value and aid them with getting recorded on the stock trades.
Among different measures for MSMEs, the FM said e-showcase linkage for MSMEs will be elevated to go about as a swap for exchange fairs and displays. MSME receivables from Government and CPSEs will be discharged in 45 days.
"The most significant declaration with long haul suggestions is the quantum bounce in the meaning of MSME, which had not been changed since the MSME Development Act of 2006 and was hotly anticipated. Alongside the choice to not have worldwide tenders for Government acquirement up to Rs 200 crore, the redefinition will help the MSME part to develop and rises as a lively and dynamic sector, adding to confidence and work in a major way.
The MSME part contributes in a critical way to the development of the Indian economy its 6.3 crore units are often considered as the foundation of the country. it had part of around 30 percent in the ostensible gross domestic product in 2016-17 the portion of the area in complete assembling yield was much higher at 45 percent. She said the Government e-Marketplace (GeM) is pushing forward for making a Unified Procurement System in the nation for giving a solitary stage to the attainment of merchandise, administrations, and works. Expressing that it offers an incredible open door for Medium, Small and smaller-scale Enterprises (MSMEs), she expressed that 3.24 lakh merchants are now on this stage and is proposed to take its turnover to Rs 3 lakh crore.
A National Logistics Policy will be discharged soon and it will explain the jobs of the Union Government, State Governments, and key controllers. It will make a solitary window coordination market and spotlight on the age of work, abilities, and making MSMEs serious.
By- Tejasva Pratap Singh, 4th year student of Amity Law School, Lucknow and currently he is pursuing B.A.LL.B.
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REFERENCE:
1. https://msme.gov.in/initiatives-ministry-msme-covid-19-relief.
2. (Covid-19) https://msme.gov.in/gallery/nature/covid-19.
3. Radhika Pandey, ‘Covid-19 and MSMEs: The ‘identification’ problem’ (Ideas For India, 20 April 2020) https://www.ideasforindia.in/topics/macroeconomics/covid-19-and-the-msme-sector-the-identification-problem.html accessed on 27 May 2020.
4. Pranbihanga Borpuzari, ‘Covid-19 relief: Government announces Rs 3-lakh crore collateral-free automatic loans for MSMEs (ET Rise, 15 May 2020) https://m.economictimes.com/small-biz/sme-sector/covid-19-relief-government-announces-rs-3-lakh-crore-collateral-free-automatic-loans-for-msmes/articleshow/75710137.cms accessed on 28 May 2020.
5. Raghuvir Srinivasan, ‘Coronavirus package | How will the COVID-19 relief for MSMEs help? (The Hindu, 17 May 2020) https://www.thehindu.com/business/Economy/coronavirus-package-how-will-the-covid-19-relief-for-msmes-help/article31603575.ece accessed on 29 May 2020.
6. Bindu Ananth, ‘Covid-19 Response: The ‘Goldilocks Balance’ For MSMEs (Bloomberg, 01 May 2020) https://www.bloombergquint.com/coronavirus-outbreak/covid-19-response-the-goldilocks-balance-for-msmes accessed on 29 May 2020.
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