Tailor Running Business

MSME In India & Way Towards Its Recovery Amid Pandemic

The global crisis of COVID 19 has left the world economy in tatters. Every single sector of the economy is taking a hit and the situation of the Indian economy is not much different. With the 4.5% contraction of economic growth rate predicted by IMF, India is all set to experience an expected economic shock, however, the sector of production which needs the most immediate relief is probably the Indian MSME sector. Contributing to over 30% of net GDP and creating over 11 crores of employment every year, the MSME sector is now facing the serious problems of loss of customers, supply chain disruptions, and restrictions regarding financial accessibility. With the strength of over 65 million MSMEs according to MSME ministry’s annual report, a large proportion of them face a fear to be shut, if not rescued.

On July 1st, 2020, World Bank announced a relief fund of 750 million dollars under the MSME Emergency Response program, intended to support and rescue over 1.5 million MSMEs in co-ordinance with Indian MSME relief fund.

It is said to be the first profound step to propel the MSME sector over time in India. (Source: Economic Times)

In this situation, this announcement from the world bank can be a huge relief for the endangered MSME set up in India. However, the question might arise that what could be its overall impact and the plan of action in order to re-establish normalcy and ignite MSME like never before?

  1. Fixing liquidity crunch: lack of formal credit could be the major setback for MSMEs in order to re-establish themselves above break-even. The world bank funding could be used to accelerate and fund the key credit channels as NBFCs (Non-Banking Finance Companies) and SFBs (Small Finance Banks) in order to fulfill the credit demand from the MSMEs.
  2. A step toward SELF RELIANCE: With the ongoing conflict with China, India needs to change its status of NET IMPORTERS, to become a nation capable of fulfilling its domestic demands with their own indigenous goods itself, growing their economy and national strata along the way and the only way of achieving that would be to provide exposure to the indigenous production and the MSME sector.
  3. Liquidity infusion and collateral-free loans: with the announcement of 3 trillion rupees of relief package earlier by the finance ministry for the MSME sector, the government had already cleared their intentions regarding the rescue of MSME although the further assistance from World Bank has made the liquidity infusion to the entrepreneurs more accessible and the collateral-free loans more attainable.
    The idea of making MSME, a leading production sector, is not new and various efforts at times have been made by the ministry but what lacks each time is the inefficient system of implementation. Although witnessing these ambitious attempts is surely a good sign for our economy.

Leave a Comment