Financial Support, Tech Solutions Among Several Measures by Govt to Support MSMEs Amid Covid

The Covid-19 pandemic and subsequent nationwide lockdowns to prevent the virus spread has severely affected the county. The small and medium businesses were the worst affected by the coronavirus pandemic. To revive sector, the central government has announced various measures, starting from last last year. These included financial support mechanisms, broadening the definition of MSME, introducing Information Technology-based Champions platform and encouraging self-employment among others. Take a look at the steps government introduced to help the stressed sector

Financial support mechanisms

1. Credit Guarantee Scheme: The Government of India provisioned Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. The scheme was launched on June 24, 2020.

2. Fund of Funds for MSMEs Scheme: The government on August 5, last year issued guidelines regarding Self-Reliant India (SRI) Fund, which had a corpus of Rs 10,000 crore, to leverage equity infusion of Rs 50,000 crore for the MSMEs.

Reclassification of MSMEs

Through a notification dated June 26, 2020, the Ministry of MSME reclassified the enterprises based on investment in plant and machinery/equipment and turnover. According to the new classification, which came into effect from July 1 last year, a microenterprise is one where investment does not exceed Rs 1 crore and turnover not over Rs 5 crore. In a small enterprise, investment does not exceed Rs 10 crore and turnover Rs 50 crore. A medium enterprise has been classified as a business where the investment does not exceed Rs 50 crore and turnover Rs 250 crore.

Besides, the ministry also replaced the erstwhile process of filing of Udyog Aadhaar Memorandum (UAM) by ‘Udyam’ registration on the concerned portal (https://udyamregistration.gov.in) for the existing and prospective entrepreneurs.

IT-based solutions

For providing technological solutions to the MSMEs, Prime Minister Narendra Modi launched CHAMPIONS portal on June 1, 2020. The portal also provides guidance to the MSMEs to grab new business opportunities.

The government has also created a network of control rooms in Hub & Spoke Model where the Ministry of MSME is the hub, while the spokes are located in the states. There are 68 state-level control rooms, which have been providing every possible support to the MSMEs in finance, market access, technology upgrade, skill development and so on. Access to Information Technology Enabled Services at an affordable cost would bring the MSME sector on a level playing field with bigger players, according to the government.

Long-term strategy for sustainability of MSMEs

1. Smart Industrial Village Policy: Aiming at achieving an inclusive and equitable growth model, besides promoting de-centralised economic structure, the government has started “Smart Industrial Village” policy, according to a release by the MSME Ministry titled “COVID-19 Relief for MSME Sector”.

The migrant worker crisis was never at the centre of policymaking as it is during the pandemic. No one can forget the sight of migrant workers walking miles to reach their native places from big cities amid lockdown, many dying on way.The policy will avoid the concentration of the population resulting into the exodus of migrant workers.

2. Promoting Swadeshi Ideology: As an incentive for import substitution, there will be a price advantage on indigenous products and their development. There will be also an added advantage on price to Indian suppliers compared with the cost of import for a particular product.

3. Encouraging innovations: For this, the government would set up a large number of business incubators in educational institutions.

4. Financial assistance: The government would prioritise lending to MSMEs from banks by including small enterprises in the earmarked priority sector and raising the sub-target limit to 10 percent from 7.5 percent. It is providing collateral-free MUDRA small loans to encourage self-employment. It has also a relaxed ceiling on working capital by banks. Besides, the governmentwill devise Safe Trade Policy for sectors dependent on Chinese imports like chemicals, pharmaceuticals and electronics.

Read all the Latest News, Breaking News and Coronavirus News here.