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Last updated: 19 May, 2020  

msme-THMB-2010.jpg MSME stimulus

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Bikky Khosla | 19 May, 2020

The micro, small and medium enterprise (MSME) sector, which has been hit hard by the economic shock caused by the Coronavirus pandemic, received a major relief in the form of a tailor-made stimulus package announced by the government last week. Several long-pending reforms have also been introduced as part of a larger Rs 20 lakh crore package, and it is now widely expected that this massive push will aid the sector combat the unprecedented COVID-19 shock.

First of all, a comprehensive credit support package has been announced for the sector: Rs 3 lakh crore collateral-free automatic loans for businesses to meet operational liabilities, buy raw material and restart business; Rs 20,000 crore of subordinated debt benefit in order to rescue stressed MSMEs; and Rs 10,000 crore to help potential and viable MSMEs expand their capacity. Thus, our cash-strapped MSMEs are expected to get a much-needed relief, which is encouraging beyond any doubt.

Then, another set of important announcements: change in definition of MSMEs and faster release of MSME payments. In the first case, both investment and turnover aspects are taken care of. Now higher investment limit will encourage existing units to modernize without worrying about losing their MSME status, while also eliminating the fear that a definition solely based on turnover could erode the manufacturing industry. Similarly, it is welcome that all MSME receivables will now be honoured by the Centre and Central Public Sector Enterprises in the next 45 days.

No doubt, these proposed measures, along with the Centre's decision not to float global tenders below Rs 200 crore; a support of Rs 4,000 crore to CGTMSE and e-linkage for MSMEs, are more than welcome, but the fact must be acknowledged – both by the government and its critics-- that it is hardly possible to address all the challenges facing the sector in just one go. Only time will say how things are worked out in the coming days, and what more can be done to actualise the sector's true economic potential.

I invite your opinions.

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