In June 2019, RBI committee headed by former SEBI Chairman UK Sinha suggested a Rs 5,000 crore stressed asset fund for the MSME sector to provide relief to small businesses hurt by demonetisation, GST, and an ongoing liquidity crisis.
- It has also recommended doubling the cap on collateral-free loans to Rs 20 lakh from the current Rs 10 lakh extended to borrowers falling under the Mudra scheme, self-help groups, and MSMEs.
Therefore, the government should continue to put concerted efforts for holistic development of MSMEs in key areas like human capacity development, knowledge services, access to finance, technology, infrastructure, market access, and ease of doing business.
International Experiences
- According to World Bank, formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies.
- 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and Sub-Saharan Africa. In emerging markets, most formal jobs are generated by SMEs, which also create 4 out of 5 new positions.
- However, access to credit remains a major problem to the MSME sector globally.
In globalised world, it is imperative to enable MSMEs to adapt and thrive in a more open environment and participate more actively in the digital transformation, to boost economic growth and deliver a more inclusive globalisation.
Way Forward
- Today enterprises need to adopt best practises and follow international standards to go forward for offering innovative solutions.
- Focus should be on transfer of information and skill development to effectively use the transferred technology.
- There is an urgent need to upgrade infrastructure utilities (like water, power supply, road/rail) for any enterprise to run its operations successfully.
- Entrepreneurs need to develop quality conscious mindsets embedded in the organisational culture.
- Sensitisation and handholding of MSMEs at different and upgraded level of certification is the need of the hour.
Finally, as recommended by India MSME Report 2018, we need an entitlement approach that can have the potential of compelling all related stakeholders to work on a common national agenda and solutions under a scientifically structured framework. This approach demands the identification and analysis of major security threats to the MSMEs, and entrepreneurship at the grass root level.