Rescuing the MSME Sector

By Arindum Bhardwaj-

Few call it the end of days, few call it the beginning of new era. 2020 has been a year full of mixed feelings, the world has gained some but has lost a lot. With each passing month the nature has been gaining back its former glory but the same can not be said for the world economies. The pandemic induced lockdowns done to ‘flatten the curve’ of the rapidly spreading infection around the world has lead to shutting down of businesses and people have been put in isolation, hence all economic activities have come to a complete stand still.

The Indian economy with no doubt has seen has seen a slowdown in the past few years but Covid-19 has given a massive blow to it, the MSME sector in particular. The MSME sector plays a vital role in GDP generation of the country, having a contribution of 30% in the annual GDP MSME sector will barely contribute to the economy this fiscal year. To tackle this issue the Indian government has come up with unprecedented techniques.

A whopping Rs 20 Lakh Crore of revival stimulas package has been announced to restart the economy, out of which Rs 3 Lakh Crore will be emergency credit line of collateral free  allocated completely to the MSME sector. This will be provided by banks and non – banking financial companies with a corpus of Rs 10,000 Crore will also be provided to help keeping the jobs of employees and revive the sector. The government has also advised state governments to provide a 6 months exemption from having registration certificates renewed or renegotiation of contracts with their buyers. The government also announced an infusion of Rs 50,000 crore in equity through Fund of Funds. This fund will be operated through a Mother Fund and a Daughter Fund. MSME’s turned NPA’s or under immense debt stress can apply for equity support from government as the body is going to set up provision of Rs 20,000 crore as subordinate debt. It is known that MSME’s are critical for employment generation and growth.  In accordance to measures to be taken by the government it is predicted that the economy should be able to get back on track in time. Measures like additional colateral and guarantee free loans, easier access to government funding, equity funding options should help the sector spring back up.

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