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Last updated: 07 Jul, 2020  

msme-THMB-2010.jpg Pain points for MSMEs

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Bikky Khosla | 07 Jul, 2020

In a tweet, the Finance Ministry last week informed that the total loan amount sanctioned under the 100 percent Emergency Credit Line Guarantee Scheme has reached Rs 1,10,343.77 crore as of July 1. With banks from both public and private sectors contributing, more than Rs 52,000 crore has already been disbursed. These figures are encouraging. Credit goes to the ministry which has regularly pushed banks for faster implementation of the scheme.

The Rs 3 lakh crore ECLGS scheme is the biggest fiscal component of the recently announced Rs 20-lakh crore Self-Reliant India Mission package, and the aforementioned figures sound great, but a recent survey points out that the benefits are not reaching deserving MSMEs, and almost 81 percent of eligible units under the scheme are structurally strong. This is a concern, and the Centre should urgently come forward to ensure that deserving MSMEs are not left out in this crisis situation.

Meanwhile, another recent survey reveals that startups have no less been hurt by the Covid-19 crisis, with 70 percent of surveyed start-ups stating that their businesses have been impacted by the pandemic, 12 percent shutting operations and 60 percent operating with disruptions. It adds that 68 percent of them are cutting down operational and administrative expenses, 30 percent are planning to lay off employees and 43 percent of them have already started salary cuts.

There's not an iota of doubt that our startups are reeling under huge pressure. The investment sentiment is subdued, and while a few of startups have managed to secure new funding, majority of them are facing lack of working capital and cash flows, which may lead to major layoffs in coming months. In this background, the government should step in to support the sector by creating an enabling investment environment and providing them with adequate funding.

I invite your opinions.

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