RISE OF MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) IN INDIA- ATMANIRBHAR BHARAT ABHIYAN 2020
BACKGROUND
The micro and small
businesses in India are characterised by heterogeneity and fragmentation, and several
them are informal. Much before the term, Micro, Small and Medium Enterprises (MSME)
caught on and within the broad contours of the ‘export substitution’ policy
paradigm, India had defined Small Scale Industry (SSI) in order to target
resources towards this segment of industries, rightly considering it to be the
engine of growth. An SSI in the 1950s was defined as an industry with
investment of up to Rs. 5 lakh in fixed assets and employment of 50/100 people
with or without power. By the 1960s, the employment criteria was dropped and
the investment ceiling thereafter was constantly increased. The MSMED Act in
2006 used ‘micro and small’ instead of ‘small scale industries’ and added a
definition of ‘medium’. Further, the definitions are based on the investment
criteria and differentiated on the basis of manufacturing and services.
DEFINITIONS
MSME Definition Earlier
MSME Definition
after Amendment
There has been
long pending demand for the revision in the definition of MSME to make it harmony
with other Law. The earlier threshold in MSME definition
have created a distress and demotivate MSMEs of advancing out of the benefits
and hence killing the urge to grow. Hence the definition has been revised to
make the threshold up by increasing the Investment Limit and introducing the
additional parameter of turnover and also distinction between the manufacture and
service sector have been eliminated.
Revised Definition of MSME
MARKET SHARE OF MSMEs IN INDIA
According to the MSME
Ministry’s FY19 annual report, the MSME sector is dominated by
micro-enterprises. India has 6.33 crore MSMEs out of which 6.30 crore -99.4 per
cent are micro-enterprises and while 0.52 per cent — 3.31 lakh are small and
0.007 per cent — 5,000 are medium enterprises.
The number of registered
MSMEs in FY20 has increased by 18.49 per cent to 25.13 lakh units from 21.21
lakh in FY19, according to government data. The growth rate, however, declined from
39.7 per cent in the last financial year that had increased from 15.17 lakh
MSMEs registered in FY18, as per the data shared by the MSME Minister Nitin
Gadkari in the Rajya Sabha.
ROLE OF MSMEs IN INDIAN ECONOMY
The Micro, Small &
Medium Enterprises (MSMEs) have been contributing significantly to the
expansion of entrepreneurial endeavours through business innovations. The MSMEs
are widening their domain across sectors of the economy, producing diverse
range of products and services to meet demands of domestic as well as global
markets.
EMPLOYMENT
As per the National Sample
Survey (NSS) 73rd round conducted during the period 2015- 16, MSME sector has
been creating 11.10 crore jobs (360.41 lakh in Manufacturing, 387.18 lakh in
Trade and 362.22 lakh in Other Services and 0.07 lakh in Non-captive
Electricity Generation and Transmission) in the rural and the urban areas
across the country.
ESTIMATED EMPLOYMENT IN SECTORS
|
Broad
Activity Category |
Employment (in lakh) |
Share (%) |
||
|
Rural |
Urban |
Total |
||
|
Manufacturing |
186.56 |
173.86 |
36.41 |
32 |
|
Trade |
16.64 |
226.54 |
387.18 |
35 |
|
Other Services |
150.53 |
211.69 |
362.22 |
33 |
|
Electricity |
0.06 |
0.02 |
0.07 |
0 |
|
All |
497.78 |
612.10 |
1109.89 |
100 |
BENEFITS FOR MSME IN
AATMANIRBHAR BHARAT ABHIYAN (SELF-RELIANT INDIA MOVEMENT)
As a measure of Economic relief
in this Covid -19 pandemic, Government came with the Special Package called as Aatmanirbhar
Bharat Abhiyan (Self-Reliant India Movement). Our Hon’ble Prime Minister
showed his vision by segregating this relief into five pillars of this movement-
Economy, Infrastructure, System, Vibrant Demography and Demand. This Package covers
various sections including cottage industry, MSMEs, labourers, middle class,
industries, among others.
As MSME sector has a vast
market share and the backbone of the Indian Economy, this Relief package
brought various benefits for this Sector. The various benefits for MSME sector
are –
1.
Rs 3 lakh crores Collateral free
Automatic Loans for Business, including MSME
Conditions
·
Borrowers
with up to Rs. 25 crores outstanding and Rs. 100 crores turnover eligible.
·
Loans
to have 4-year tenor with moratorium of 12 months on Principal repayment.
·
Interest
to be capped.
·
100%
credit guarantee cover to Banks and NBFCs on principal and interest.
·
Scheme
can be availed till 31st Oct 2020.
· No guarantee fee, no fresh collateral.
2. Rs 20,000 crore Subordinate Debt for MSMEs
Conditions
·
This
loan shall strictly focus on the Stressed MSME.
·
Functioning
MSMEs which are NPA or are stressed will be eligible.
· Promoters
of the MSME will be given debt by banks, which will then be infused by promoter
as equity in the Unit.
3. Rs 50,000 crore equity infusion through MSME Fund of Funds
Conditions
·
Provide
funding in the form of Equity for MSME with growth potential and viability
· Fund of Funds will be operated through a Mother Fund and few daughter funds.
· Mother
Fund means that Government provide 10,000 Crore of funding through Equity
infusion through which the Private Funds (VC) or Daughter funds would attract
and can Invest upto 40,000 Crores in these MSMEs.
4. Global tender to be disallowed upto Rs 200 crores
Conditions
·
Global
tenders will be disallowed in Government procurement tenders upto Rs 200 crores.
·
This
amendment would protect MSME and other Companies from unfair trade Practices.
5. No fresh Insolvency Proceedings against MSME for One Year
· The
government has raised the minimum threshold to initiate insolvency proceedings
to Rs 1 crore from Rs 1 lakh.
· The second important measure announced is a special insolvency resolution framework under Section 240A of the IBC which will be notified soon.
6. E-Market Linkage
· MSMEs
currently face problems of marketing and liquidity due to COVID
· e-market
linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
CONCLUSION
The government and financial
institutions need to work in harmony for all players in the MSME lending
ecosystem to thrive and address the current challenges plaguing them.
Institutions such as the SEBI, which helped establish an MSME exchange on both
the BSE and the NSE, need to ensure that the listing norms require minimal
disclosure without hampering the interest of investors, have relaxed public shareholding
requirements, make sure paperless processes take effect and provide an
opportunity for anchor investors to invest in MSME stocks on the exchange.
Regulations and frameworks
must be developed to manage short-term and long-term crisis. As the MSME sector
suffers from closure very often, the process of closure or rehabilitation must
be smooth and cost-effective.
It has been a long-standing
demand from industry to hike the investment limits, as with inflation, units
often cross the threshold that will bring them benefits. The
decision to add turnover criteria to investment is seen as a good decision as
there are units that leverage a small capital to post large revenues.
In the end, It would come in
the near future that how all these efforts, whether pre and post this Covid-19
package would be beneficial for the MSME Sector.
RELATED LINKS
Regards
CS Shubham Kapoor
Ph- 9711244345, 7017667034
Email-
kapoor.shubhamm@gmail.com
Nice Article
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