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India’s MSME sector swells, adds these many enterprises in FY20; micro businesses dominate

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.

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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, the data shared by the MSME Minister Nitin Gadkari in the Rajya Sabha on Monday showed. Overall the number of registered MSMEs in India in the past five years stood at 90.19 lakh. 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 while 0.52 per cent — 3.31 lakh are medium and 0.007 per cent — 5,000 are medium enterprises.

While an increase in the registered number of small businesses would help the government in measuring their contribution to the sector’s share in the country’s GDP along with offering various tax and investment benefits, the current scenario of Coronavirus outbreak might impact MSMEs hard given the disruption caused in the supply chain, warehousing, export credit etc. Also, the government’s decision to lockdown 75 districts where Coronavirus cases have been reported might prove to be a double whammy for MSMEs. These districts are based in Haryana, Himachal Pradesh, J&K, Karnataka, Kerala, Andhra Pradesh, Delhi, Gujarat, UP, Telangana, Rajasthan and more.

“The new restrictions on movement within the country will make it even harder for sectors heavily dependent on labor for manufacturing and production, especially in the largely unorganized MSME sector. In the coming months, these firms are likely to suffer a dual shock of supply and demand along with constraints of capital as well as labor,” Pushkar Mukewar, Co-founder, Drip Capital told Financial Express Online. The company offers trade finance to small and medium-sized exporters.

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Segment-wise as well micro-enterprises have been registered the most. The registered units increased from 18.70 lakh in FY19 to 22.06 lakh in FY20 while small units went up from 2.41 lakh to 2.95 lakh. Medium-size businesses only increased from 9,403 units to 10,981 units during the said period, according to the data shared by Gadkari. Last week, Assocham had recommended concessional working capital loans for MSMEs “equivalent to one to three month’s (based upon the extent of disruption) average turnover of last year.” Also, another concessional finance “at a rate of 5 per cent for three months through SIDBI,” Assocham said in a report should be provided to MSMEs to ensure adequate liquidity is maintained in the business operations.

“Without strong financial stimulus, domestic industries are likely to enter a slowdown cycle in the coming weeks, and this will have a clear negative impact on India’s export capabilities in the medium to long term. Policymakers need to intervene urgently to keep businesses running and preserve morale, not only for now but also for the foreseeable future,” added Mukewar.

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