MSME Sector: Benefits Owing To Pandemic

The Micro, Small and Medium Enterprises (MSMEs) play a crucial role in the economic growth of India. According to current estimates, this sector contributes around 6.11% to the manufacturing Gross Domestic Product (GDP) along with more than 24.63% of the GDP from service-related enterprises. Providing employment to over 110 million people, the MSME sector contributes around 45% of the country’s total exports. In tune with the manifold needs and requirements of this sector, the government has taken several initiatives to boost this sector. The benefits from government measures can accrue to an MSME enterprise, once it registers itself under the provisions of the MSME Act.

If you too have a Small and Medium Enterprise (SME) and are registered under the act, you can apply for business loans, available on Finserv MARKETS. Prior to applying you can check your business loan eligibility via the online business loan calculator.

Effect of the pandemic on the MSME sector

The outbreak of the pandemic along with the subsequent lockdowns had a negative impact on the MSME sector. Along with demand and supply logjams, procurement of raw material for production along with the unavailability of employees remained the biggest problems. This sector also faced challenges pertaining to debt repayments, payment of wages and salaries, and depositing the statutory dues. According to surveys, the earnings of the MSMEs dipped by up to 50%. This, in turn, resulted in a sharp liquidity crunch.

Steps taken by the government to revive the MSME sector

To revive the sector the government announced a slew of measures.

1. Revised criteria for the classification of MSMEs: According to Micro, Small and Medium Enterprises (MSMED) Act, 2006 MSMEs were defined as an industrial undertaking or business concern or any other establishment engaged in either manufacture or production of goods of any industry or engaged in providing/rendering any services/s. The eligibility criteria was the investment in plant and machinery or equipment. Here’s a look at the criteria as per the MSMED Act:

To provide benefits to the MSMEs, because of the pandemic, the government announced the new composite criteria: investment in plant and machinery or equipment along with turnover. From July 1, 2020, the reclassification stood as:

The reclassification procedure thus included the following:

• The distinction between manufacturing and services was removed.
• The investment limit was considerably increased.
• A new criterion of turnover limit was added.

Because of reclassification, more enterprises could be classified as MSMEs and avail benefits for the sector. Also, it allowed the MSME entities to expand, without the fear of losing their MSME status due to enhancement in their capacities.

If you too are now eligible to become an MSME, you can now apply for business loans on Finserv MARKETS. This loan comes with simple business loan eligibility conditions, which can be immediately known using the business loan calculator.

1. Collateral-free loans: The second measure taken by the government was to provide collateral-free automatic loans for MSMEs. It would also provide an emergency credit line to MSMEs from financial institutions, up to 20% of the outstanding loans.
2. Subordinate debt: This measure provided Rs. 20,000 Crores as subordinate debt to MSMEs which were stressed or had become NPAs because of the adverse impact of the pandemic.
3. Interest subvention: As part of the Mudra Scheme’s Shishu Cover, the government announced a 2% interest subvention for MSMEs, availing loans up to Rs. 50,000. The subvention was provided to all MSMEs, who were making prompt payments for the previous 12 months.
4. Equity Infusion: The government also announced that equity infusion of Rs. 50,000 Crores would be provided for the growth and expansion of MSMEs.
5. Import protection: The government disallowed global tenders for government procurement up to Rs. 200 Crores.

Conclusion: Thus, various benefits were extended to MSMEs, owing to the adverse impact of the pandemic. Along with availing the benefits announced by the government, you can further boost your business by availing business loans. You can choose to apply for business loans, available on Finserv MARKETS to receive multiple benefits, like need-based offerings, a plethora of options to choose from, fast online process and quick disbursals. To know your business loan eligibility, you are just required to use the online business loan calculator.