For All Things Small and Bountiful

The Economic Times     9th December 2020     Save    

Context: Covid-19 has pushed lakhs of small and medium businesses to the edge, and many to the brink of closure. It is a ‘Code red’ moment for these businesses due to uncertainty, which may take months to recover.

Worsening Condition of MSMEs:

  • Loss of business: As per Confederation of All India Traders’ estimates, retail trade lost business worth Rs.9 lakh crore during the first 60 days of lockdown, non-essential sector operating at 25% pre-Covid levels.
    • There are over 60 million Micro, Small and Medium Enterprises (MSMEs), 12 million kiranas and about 13 million HoReCa (hotel, restaurant and catering) businesses, accounting for nearly one-third of India’s Gross Domestic Product (GDP).
  • Huge credit gap: According to the 2019 International Finance Corporation-Intellecap report, the credit gap for MSME sector is estimated to be Rs.16.66 lakh crore.

Steps taken by the Government:

  • The Rs.3 lakh crore collateral-free automatic loan, under the Emergency Credit Line Guarantee Scheme was a much-needed relief for the stressed businesses.
  • Recently, five task forces have been set up to make small businesses future-ready, which is expected to focus on critical areas such as technology, quality and exports.
  • Goods and services tax exemption introduced: for businesses with an annual turnover of up to Rs.40 lakhs.
  • Microcredit scheme PM Street Vendor’s Atmanirbhar Nidhi (PM SVANidhi): was launched in June to provide credit to small entrepreneurs such as street vendors and hawkers.

Way Forward:

  • Introduce a policy framework: From a long-term perspective, the Government needs to remove regulatory bottlenecks and implement bold structural reforms to soften the economic blow rendered to MSMEs.
  • Technology and digital-enabled services: will help in creating a more level-playing field for MSMEs.
  • Reduce the number of tax slabs in the present GST system.
  • Provide easy access to Micro Units Development and Refinance Agency (MUDRA) loans: by easing up the application and sanction processes.

Conclusion: With the current emphasis on locally manufactured products, the value of MSMEs has come more to the forefront for Atmanirbhar Bharat’s sustainability.