A lot done but more needs to be undertaken for MSMEs to boost their liquidity, skill development

June 28, 2020 3:09 PM

Ease of Doing Business for MSMEs: The central government had kept a target of achieving a $5 trillion economy by 2024 out of which $2 trillion was to come from the MSME sector.

Technology advancement is one of the key areas for the government focusing on encouraging small businesses.
  • By Dr. Niranjan Hiranandani

Ease of Doing Business for MSMEs: The micro, small and medium enterprises (MSME) is the backbone of Indian economy and the second-largest employment generator in the country needs special attention to come out of the present crisis. The MSME sector in India generates nearly 70 million, has a network of 30 million units and manufactures more than 6000 differential products has been hit adversely by the Covid pandemic as most economic activities had come to a complete standstill. Last year, around 65,312 micro-enterprises had generated around 5.2 lakh jobs under the central government’s credit-linked subsidy scheme- Prime Minister’s Employment Generation Programme (PMEGP) whereby Rs 1929.83 crore margin money subsidies was used in that year. The government realizing the importance of the sector was pushing for reforms in that direction to achieve a double-digit GDP growth rate, before the coronavirus crises, took place.

The three-month lockdown had created a situation of survival for these smaller businesses enterprises most of whom are facing acute shortage of working capital to run their business. The government has been putting in lots of efforts to get the sector out of the brink of collapse. Since the last three months, it has introduced several measures to infuse liquidity to provide relief to this ailing sector.

They have introduced measures like offering collateral-free loan assistance and special liquidity schemes through partial guarantee schemes to revive the sector. This, the government hopes would arrest job losses and would help in kick-starting the economy again.

The central government had kept a target of achieving a $5 trillion economy by 2024 out of which $2 trillion was to be the contribution of the MSME sector. India can still hope to achieve the target as we are a fundamentally strong economy.

Technology advancement is one of the key areas for the government focusing on encouraging small businesses to achieve the goal of MSMEs contributing half of India’s GDP in the next five years. It is the digitization that is helping businesses operate during the lockdown.

Also read: CII wants more MSMEs to tap into Rs 3 lakh crore credit scheme; may urge govt to make this key move

Technology Centre Systems Programme (TCSP) is been implemented by the Ministry of MSME at an estimated cost of Rs 2200 crore. The World Bank has given loan assistance of $200 million to set up 15 new Tool Rooms and Technology Development Centres (TCs) and also upgrade the current 18 TCs across the county. These TCs and other training Institutes have skilled 3, 59,361 youth as per the ministry.

In order to help youth to become an entrepreneur, and to help them procure prerequisite skills, the government had sanctioned over Rs 135 crore under the Entrepreneurship Skill Development Programme (ESDP) for organizing various skill development programs along with state government, industry bodies, social enterprises, etc. In 2019, 3,000 such programs were conducted and sanctioned. The industry bodies and various other elements of the society have also taken the onus of partnering in the program and run their own skill development units to help achieve the goal.

The central government has taken a lot of steps in the recent past to provide a boost to the MSME sector. According to Niti Aayog, nearly 20 per cent of the expenditure today is on technological advancement. Other than the technology centres also set up, there is also a proposal for 100 extension technology centres

There are several things that the government needs to do at this stage. Firstly ensure that the liquidity measures are percolated down to these small businesses. There are almost Rs 6.9 lakh crore lying idle with banks as a part of their reserve measure which can be given to the stressed MSME sectors.  There is also an urgent need to provide a one- time restructuring of loans for smaller businesses to prevent the increase in defaults. Though the central government has been taking a lot of initiatives, there is also an urgent need for the central government to design a comprehensive integrated policy to promote skill development and credit availability for expedited growth.

Dr. Niranjan Hiranandani is President –ASSOCHAM & NAREDCO & MD, Hiranandani group. Views expressed are the author’s own.

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