The micro, small, and medium enterprises (MSMEs) contribute a significant amount to the Indian Gross Domestic Product (GDP). Additionally, this sector employs over 11 crore Indians and accounts for almost 50% of the total exports.
There are more than 63 million MSMEs in the urban and rural areas. The lockdown has significantly impacted their operations, and some MSMEs may have shut down their businesses due to the ongoing scenario.
The Indian Government is taking multiple steps to face the challenges posed by the coronavirus pandemic. Prime Minister Narendra Modi aims to make the country self-reliant with the AtmaNirbhar Bharat program.
Three primary phases of the program
- Phase I – Support to the MSMEs
- Collateral-free automatic loans
These include emergency credit lines for businesses with an outstanding debt of less than INR 25 crore and turnover up to INR 100 crore. This SME loan (small and medium enterprises) will have a tenure of four years with a one-year principal moratorium. These will be offered by banks as well as financial institutions like Mahindra Finance.
Almost 45 lakh businesses in this sector will benefit from these loans and resume operations, thereby safeguarding employment.
- Subordinate debt
The Government of India is provisioning an additional INR 20,000 crore as subordinate debt to help stressed MSMEs. The promoters will be offered a loan, which can be infused as equity in the business.
This business loan as subordinate debt will provide financial assistance to about two lakh MSMEs.
- Equity infusion via fund of funds (FoF)
AnFoF with a corpus of INR 10,000 crore will be set up to help businesses expand. The fund will operate via a ‘Mother Fund’ and ‘Daughter Funds’. The structure will allow ‘Daughter Funds’ to leverage INR 50,000 crore and help MSMEs to overcome equity shortage.
The equity infusion will assist the MSMEs to list on the Stock Exchanges.
- Other measures
- Revision of investment and turnover limits, which makes it easier for smaller businesses to meet the SME loan eligibility
- Prohibition of global companies to bid for tenders of up to INR 200 crore
- E-markets to replace exhibitions and trade fairs
- Fintech support to increase transaction-based lending
- Government and Central Public Sector Enterprises (CPSEs) to release dues within 45 days
- Phase II – Support for the poor
- 63 lakh agricultural loans amounting to INR 86,600 crore were approved between March 1, 2020, and April 30, 2020
- National Bank For Agriculture & Rural Development (NABARD) had provided INR 29,500 croreto cooperative and regional rural banks (RRBs)to refinance their loans
- Over INR 11,000 crore was released to the State Disaster Response Fund (SDRF) to set up shelters for migrant workers
- Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) support to be offered to returning migrant labors
- Phase III – Support to agriculture
- NABARD to provide additional refinance of INR 30,000 crore to rural cooperative banks and RRBs, which will benefit approximately 3 crore small and marginal farmers; these funds will help them in meeting their crop loan requirements
- Concessional SME loan interest rates to be offered to farmers under the Kisan Credit Card scheme amounting to INR 2 lakh crore; this will provide monetary aid to approximately5 crore farmers
- INR 1 lakh crore Agri Infrastructure Fund to strengthen logistics and capacity building
- INR 10,000 crore for enabling about two lakh micro food enterprises (MFEs) undertake technical up-gradation to attain international food standards
- Other new reforms
The scheme will make the necessary reforms to fast-track investment clearance via the Empowered Group of Secretaries (EGoS). Policy reforms will be made to boost industries, like:
- Commercial coal mining
- Mineral sector
- Defense production
- Atomic energy
As India slowly moves towards unlocking the economy, various schemes are being offered to help businesses commence operations.