Prime Minister Narendra modi has unveiled a 12-point action plan for micro, small, and medium enterprises (MSMEs). It includes subsidised loans, higher procurement and easier labour and green rules, as he sought to address concerns of small businesses, many of which have been rather critical of demonetisation and the goods and services tax. The outreach comes against the backdrop of a credit crunch, sluggish manufacturing activity and increased competition from imports, especially from China.
Modi said, “In this age of globalisation, the 12-point action plan will strengthen MSMEs and help write a new chapter for them.” In the coming 100 days, the PM also intends to monitor implementation of the package across 100 districts. In the action plan, the provision for a 2 per cent interest subsidy for new or incremental loans of up to £100,000 taken by MSME units through a new portal that promises to approve loans in 59 minutes is seen to be most significant. He also announced an additional 2 per cent subsidy for small exporters for pre and post-shipment credit. The announcement comes as an attempt to boost exports and bridge the current account deficit to ease pressure on the rupee that has depreciated around 15 per cent in 2018.
The subsidy is seen as a move to address credit woes of small businesses that have been adversely impacted by the liquidity crunch in the system after IL&FS defaulted on repayment and banks and mutual funds became wary of lending to the sector. The government has been trying to get RBI to ease rules for non-banking finance companies that are a major source of funding for MSMEs, something that the central bank has been unwilling to do.
PSUs asked to procure 25% of goods from SMEs
Apart from credit, the bouquet of steps focused on enhanced market access for which the government has decided to tap public sector companies and government departments. As part of the scheme, public sector units have been asked to procure 25% of their goods from small enterprises, instead of 20% at present, with a new quota of 3% purchases introduced for women entrepreneurs. Similarly, the Prime Minister asked all state-run firms to register on the government e-marketplace, or GeM, the online procurement platform for government agencies, and also get their vendors to register. This will help MSME units to provide goods and services through the platform.
