Restart India

Aug 29, 2020

The micro Small and Medium Enterprise (MSME) sector in India is a unique mix of enterprises using conventional as well as modern technologies At national level relevant information of MSME sector on various parameters like production , technology , employed , types of fuel used and their consumption , energy saving potential , growth scenarios etc. are not readily available. This limits the design of appropriate policy instruments to ensure sustainable growth of MSME sector. To address this barrier, the Bureau of Energy Efficiency (BEE), Ministry of Power, Government of India, has initiated an ambitious project of mapping the energy intensive MSME sub-sectors across the country. 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 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 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 ofliquidity 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
  • Zero Defect Zero Effect
  • Quality Management Standards & Quality technology tools
  • Grievance Monitoring System
  • Incubation
  • Credit Linked Capital Subsidy System
  • Woman Entrepreneurship

The role of micro, small and medium enterprises (MSMEs) in the economic and social development of the country is well established, the sector accounts 45% of the manufacturing output and 40% of total exports of the country. The sector provides employment to about 69 million persons through 26 million enterprises throughout the country. Over 6000 products ranging from traditional to high-tech items are being manufactured by the MSMEs in the country. The labour to capital ratio in MSMEs and the overall growth in the sector is much higher than in the large industries. The geographic distribution of the MSMEs is also more even. Thus, MSMEs are important for the national objectives of growth with equity and inclusion. MSME sector accounts for 33.4% of India’s manufacturing output, employing about 120 million and generating 45% of India’s export. Due to COVID outbreak and consequent stoppage of economic activities there is panic. MSME sector continues to be the most vulnerable because of its reliability on day-to-day business. According to a survey covering 5k MSMEs, conducted by the All India Manufacturers’ Organisation has revealed that more than 70% of the businesses weren’t able to pay salaries in March.  Even though the government is taking countermeasures to combat the loss incurred due to the pandemic, MSMEs are struggling for stability. As per the CII CEOs poll on the impact of COVID-19 on the economy and industry, 54% of CEOs predict job losses in their respective sectors post the lockdown whereas 45% foresee 20% layoffs. It is also important that the financial relief not just provide temporary relief by infusing short-term liquidity, rather address medium to long term requirements. It is critical for the government to introduce a policy framework and foster a holistic approach toward building the MSMEs resilience to the pandemic outbreak, as once the pandemic fades out, the nation will require its growth engine to start building the economy. The Global Pandemic had India's MSME Sector, on its knees #RestartIndia, an initiative by Muthoot Fincorp Ltd. and INKtalks had a different idea for the redemption of these businesses through website partnered with industry experts which is the need for the hour. A single platform to get information on various schemes that the government has initiated and to connect with professionals/experts from various fields is in sync with the Atmanirbhar project, said Gadkari. Experts from various fields and industry domains address the questions and provide information on schemes and initiatives of the government, Muthoot FinCorp said in a release. The platform designed is to address the needs of the MSME sector, particularly the nano and micro enterprises.