The Prime Minister, Shri Narendra Modi, launched a historic support and outreach programme for the Micro, Small and Medium Enterprises (MSME) sector. As part of this programme, the Prime Minister unveiled 12 key initiatives which will help the growth, expansion and facilitation of MSMEs across the country.
There are five key aspects for facilitating the MSME sector. These include access to credit, access to market, technology upgradation, ease of doing business, and a sense of security for employees. The 12 initiatives will address each of these five categories.
The 12 initiatives include:
- 59 minute loan portal to enable easy access to credit for MSMEs. Loans upto Rs. 1 crore can be granted in-principle approval through this portal, in just 59 minutes.
- A 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. For exporters who receive loans in the pre-shipment and post-shipment period, there will be an increase in interest rebate from 3% to 5%.
- All companies with a turnover more than Rs. 500 crore, must now compulsorily be brought on the Trade Receivables e-Discounting System (TReDS). Joining this portal will enable entrepreneurs to access credit from banks, based on their upcoming receivables. This will resolve their problems of cash cycle.
- Public sector companies have now been asked to compulsorily procure 25%, instead of 20% of their total purchases, from MSMEs.
- Out of the 25% procurement mandated from MSMEs, 3% must now be reserved for women entrepreneurs.
- All public sector undertakings of the Union Government must now compulsorily be a part of GeM. He said they should also get all their vendors registered on GeM.
- 20 hubs will be formed across the country, and 100 spokes in the form of tool rooms will be established.
- Clusters will be formed of pharma MSMEs. 70% cost of establishing these clusters will be borne by the Union Government.
- The return under 8 labour laws and 10 Union regulations must now be filed only once a year.
- Now the establishments to be visited by an Inspector will be decided through a computerized random allotment.
- Under air pollution and water pollution laws, now both these have been merged as a single consent. The return will be accepted through self-certification.
- An Ordinance has been brought, under which, for minor violations under the Companies Act, the entrepreneur will no longer have to approach the Courts, but can correct them through simple procedures.
Significance of MSMEs:
Micro-, Small and Medium-sized Enterprises are the backbone of most economies worldwide and play a key role in developing countries.
According to the data provided by the International Council for Small Business (ICSB), formal and informal Micro-, Small and Medium-sized Enterprises (MSMEs) make up over 90% of all firms and account on average for 60-70% of total employment and 50% of GDP.
These types of enterprises are responsible for significant employment and income generation opportunities across the world and have been identified as a major driver of poverty alleviation and development.
MSMEs tend to employ a larger share of the vulnerable sectors of the workforce, such as women, youth, and people from poorer households. MSMEs can even sometimes be the only source of employment in rural areas. As such, MSMEs as a group are the main income provider for the income distribution at the “base of the pyramid”.