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Industrial Developments Of Micro Small And Medium Enterprises

Industrial Developments Of Micro Small And Medium Enterprises


Micro Small and Medium Enterprises (MSMEs) represent a vital segment of Indian economy because it is strategically crucial for employment generation, forex earnings and boost economic equality across the country. However, this section is hit the foremost thanks to COVID-19 pandemic and resultant country-wide covid lockdown.

With a read to revive this core sector of Indian economy, the Government of Asian country proclaimed economic measures that are expected to supply some relief to the present troubled sector by method of meeting its imperative funding wants additionally as liquidity to resume business activities. Some of the key announcements for industrial developments and its impact on MSMEs are as follows:

Rs.300000 large integer emergency assets facilities for businesses, including MSMEs

This is a right away aid for eligible MSMEs (i.e., having turnover up to Rs.100 large integer and outstanding debt up to Rs.25 crore) in type of collateral-free, interest-capped, fixed-tenured with fixed-moratorium and government-guaranteed automatic loans. MSMEs are in imperative will like of assets funds to service their already due short-run liabilities (including worker salaries) against stalled business activities and resultant stuck debtors. Progressive working capital funding to MSMEs is ultimately expected to spice up velocity of cash in economy and facilitate revival of business activities of MSME sector additionally as economy as a full.

The allocation of Rs.300000 large integer is anticipated to be cheap in providing relief to MSME section as total debt exposure to MSME* segment (i.e., as well as public sector banks, non-public banks and NBFCs)remained at Rs.17.800000 large integer in Jan 2020 (which reduced from Rs.18.500000 large integer in Jan 2019), as well as recent disbursement of Rs.92.3 thousand large integer throughout CY19. moreover, it's expected that NBFC’s disposal share that has contracted throughout CY19 marked by its proportion in overall MSME disposal remained at 12.50% in Gregorian calendar month2019 as against 14.10% in december2018, is anticipated to extend after implementation of the aforementioned theme. moreover, this extra line of credit along side existing funding lines (which experienced  decrease in Gregorian calendar month 2019 as compared with december2018) is expected to supply cheap support to MSMEs.The fund of fund initiative is meant to encourage potential MSMEs to expand their size and capability. This theme is anticipated to somewhat solve MSME’s issues of restricted equity and can give additional headroom for raising debt for growth. Visible of its size of Rs.50 thousand large integers (i.e., Rs.10 thousand large integer of corpus fund and Rs.40 thousand large integer of planned leverage), it's expected to supply much required impetus for growth of MSMEs.

Rs.20 thousand large integers Subordinate Debt for Stressed MSMEs

This theme is targeting around 200000 MSMEs that area unit in stress or became Non performing assets(NPA); thus, they fall in terribly high risk bracket for debt finance. Here, the funds are going to be season to the promoters in style of debt, which the promoters can infuse within the business in style of equity. This may be finished the support of Rs.4, 000 large integers from the Government to CGTMSE (Credit Guarantee Fund). By providing existential support, this scheme is predicted to produce stressed MSMEs a chance to revive their operations in current scenario, which is expected to alleviate some stress on MSME disposition scheme.

Other Relief Measures

No international tenders for state tenders of up to Rs.200 crore

To support Indian MSMEs from undue competition from foreign players in such difficult times, government has determined to amend ‘General money Rules’. This step is predicted to produce increased business opportunities to Indian MSMEs, curtail competition from foreign players and supply encouragement to ‘Make in India’ mission.

Sector-specific relief measures:

Relief to Contractors given by extension of up to 6 months for completion of written agreement obligations, as well as in respect of Engineering procurance and Construction (EPC) and concession agreements with none penalty and/or additional price.

Relief to land comes - the registration and completion date for all registered comes are going to be extended up to 6 months.

EPC contractors kind an oversized a part of little and medium enterprises and area unit mostly obsessed with government or government-related agencies for projects; thus, their fortune is coupled with Government outlay on infrastructure. On the other hand, the important estate trade characterised by illiquid investments was already underneath stress because of varied reasons. However, each of those sectors give Brobdingnagian employment, and hence, area unit vital sectors for overall well-being of the economy. With due thought to their sheer size and scale in mixture, Government has provided some relaxations specifically to these sectors. It’s been proclaimed to increase fundamental measure for completion of comes for EPC contractors by six months without any price to contractor (and partly unharnessed bank guarantee to the extent of completed contracts). Whereas for real estate sector, COVID-19 event is projected to be treated as ‘force majeure’underneath land administrative unit (RERA), and hence, to increase registration and completion of the timeline of land comes by six months.

Modification in scope of MSMEs

New definition of MSME and different measures for MSME

The Government has proclaimed revision in definition of MSME that was antecedently primarily based solely on investment in plant and machinery/equipment to investment in plant and machinery/equipment and annual turnover.

It is determined that scope of MSME are going to be widened attributable to new definition, that is predicted to serve 2 vital intends. First, MSMEs that were discouraging investment for expansion/modernisation so as to stay inside the purview of MSME (as per previous definition) for enjoying the particular advantages for sector, currently are going to be intended to undertake technological up-gradation and modernization of plant and machinery for higher quality and output. moreover, capital intensive MSMEs and start-ups are going to be ready to avail advantages underneath varied government schemes and incentives also because it will neutralize the inflation result because the gift limit of investment in plant & machinery for classification of MSMEs was set in 2006. The second intend is that larger range of institutions can constitute orbit of MSME once modification in definition, so these units are going to be benefited from varied government schemes like Trends (a dedicated bill discounting system for MSMEs), CGTMSE, Public procurance Policy (i.e., 25 procurance for Central Public Sector Enterprises (CPSE) is compulsory.

*The Government is intending to further increase investment up to Rs.50 crore and turnover upto Rs.200 crore for Medium

Enterprise. It is also being considered to update criteria to investment ‘or’ turnover based as against proposal of investment ‘and’ turnover based. The said change is proposed for further widening the MSME space with an aim to increase its overall export contribution upto 60 percentage as well as GDP contribution upto 50 percentage.

Rating Actions in SCG (Small Corporate Group) during current financial year:

During April-May 2020 (during lockdown period, till May 15, 2020), out of the total ratings assigned/reviewed in SCG segment of CARE, 95% of the total initial ratings were assigned under below investment grade category including 21% in default grade and only 5% ratings were assigned in Investment grade. Similarly in surveillance portfolio, 83% of ratings were reaffirmed and 6% were downgraded, while 11% upgrades were reported. Hence, the government’s stimulus packages aimed at MSMEs at appropriate time is expected to provide relief to pandemic hit Indian MSMEs.

Concluding Remarks

The domestic economy has been struggling to contain pandemic through bold steps including national lockdown, social distancing and curtailing non-essential government spending among others. Moreover, the major export markets including US, UK and the Europe are worst hit by the pandemic, and demand generation at previous level from these countries post COVID-19 would take considerable time which would also hurt domestic MSMEs. In order to contain the deterioration of financial health of this sector, the government has announced various stimulus packages. The announcement of Rs.3 lakh crore worth of line of credit as against existing outstanding debt with MSME of Rs.17.8 lakh crore (as on January 2020 end) is envisaged to be reasonable and likely to provide relief to the sector. Also, NBFC’s lending share to MSMEs, which experienced shrinkage in recent past owing to some borrowing difficulties at their end, is expected to recover at faster pace due to the various stimulus packages announced for NBFC segment as well.

Furthermore, new definition of MSME will widen the scope of MSME coverage. The said definition change is expected to further boost undertaking of expansion, up-gradation and modernisation of plant and machinery by MSMEs. Also, larger number of establishments will fall under MSME space and will be able to be benefited from various schemes intended at MSMEs.

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