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Govt’s decision to revise MSME definition was long due; relief amid coronavirus to boost investments

MSME : The Indian economy is heavily dependent on the manufacturing and services sectors. Small scale industries or micro, small, and also medium enterprises constitute a huge portion of these sectors. MSMEs have been emerged as a dynamic backbone of the Indian economy in the last few decades. The government has extended certain benefits to entities falling with the MSME bracket to strengthen and incentivize them.
MSME businesses are required to get themselves registered under the MSMED Act by inter alia submitting a memorandum to avail the myriad of benefits in store for them as like easier access to loans from banks facilitated by the Government with lower interest rates, collateral-free loans to MSMEs through schemes such as Credit Guarantee Fund Trust for Micro and Small Enterprises, various tax rebates offered specifically to MSMEs, certain government tenders which are reserved for industries in the MSME category and also setting out of statutory timelines within which buyers of MSME’s are required to make payments. Such benefits appear in place to not only to ensure cash liquidity for MSMEs but also to facilitate them in an atmosphere of the competition where larger industries have it easier.

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MSME
The Prime Minister announced an economic relief package of Rs 21 lakh crore titled Atmanirbhar Bharat Abhiyan in his address to the nation on May 12. The details of this economic package were announced by the Finance Minister in a staggered manner over a course of five days, starting May 13. On the primary day, various reliefs and benefits for MSMEs were announced such as: fixing of a Fund of Funds of INR 10,000 crore which can provide equity funding support for MSMEs; provision of Rs 20,000 crore of subordinated debt for 2 lakh MSMEs which are stressed or have become non-performing assets and also setting up of Rs 3 lakh crore emergency working capital facility for the businesses through collateral-free term loans at the concessional rates.

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The need for upward revision of those thresholds was long due to since many entities apprehended taking in additional investment due to the fear of missing out on MSME benefits and consequently blocked their path to growth and increasing their revenues. Because of the inflation, various entities would fall out of the threshold thus losing out on the benefits that were initially available to them.
MSME is simple, that more startups in the manufacturing and service sector will follow through with this processes. The reliefs announced will act as a re-starter package for those MSMEs that have slumped to a zero or low cash situation during the national lockdown. Banks are more comfortable giving out loans to MSMEs for working capital needs, that even though collateral-free for MSMEs, will be guaranteed by the Central Govt. With increasing the scope of MSMEs and extra reliefs announced, the govt has attempted to buffer the hit that the MSME sector is experiencing during the coronavirus crisis.

 

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