The Micro, small and Medium Enterprises (MSME) which play a crucial role in the development of the country’s economy have had some generous allocation of funds during the budget’s announcement on July 5th, 2019. Finance minister’s budget speech with slew of announcements and promises has garnered great hopes in the MSME sector which currently employs millions of people in the country.
The major takeaway from the budget for the MSME sector included allocation of around Rs 350 crore for 2 percent interest subvention for all GST registered MSMEs on fresh and incremental loans. It seemed like the government has acknowledged the sector’s major contribution in generating employments. This effort by the government can revive the growth prospective of the MSMEs and create more job opportunities. Additionally, the disbursal of loan through an online portal within 59 minutes will save ample time which thousands of the MSME units otherwise spend going pillar to post to save credit.
However, the 59 minute loan scheme had been announced by the government on November 2018 and as much as banking officials are apparently embracing and promoting the new funding avenues, the actual scenario is quite different when it comes to disbursing loans.
Sanjeev Layek, a representative of World Association for Small and Medium Enterprises said, “Through this scheme, the online portal gives MSMEs loan within 59 minutes, which indeed is very fast, but when these MSMEs approach banks for loans, they are asked for more documents and collaterals for disbursing loans.”
The loan availability may not be as easy as the government has made it seem in the proposed budget. But the banks’ stringency is also valid since providing collateral-free loans may jeopardize their funds thus increasing their Non Performing Assets(NPA). The government could have done something more to make the provision more robust but considering the stress the budget put into the MSME sector, it may have plans to empower the sector further.
Besides, the announcement in the budget to launch a common digital platform for MSMEs to upload their bills and process payments bodes well for the latter. This will eliminate delayed payments from the large companies thus resolving the liquidity crunch the MSME sector has been facing in recent times. It can finally bring small entrepreneurs into a formal financial system.
An extension of pension benefits to around 3 crore retail traders and shopkeepers with an annual turnover of less than Rs 1.5 crore is a commendable measure taken by the government. With the sector being comparatively unorganised, this scheme may gradually bring them online. Providing assurance to the small businesses on their financial security will give them long term life plans and will also contribute to their disposable income which keeps the economy of the country moving.
Many of our country’s small enterprises of women entrepreneurs have the potential to stretch to large scales but they have been constrained by the low credits. The announcement made in the budget speech 2019 on increment in the provision of Mudra loan of up to Rs 1 lakh to the women entrepreneurs will boost their growth which will further reflect in the country’s economy.
Considering the funds allocations and the new schemes and programmes the government has announced for the welfare of the MSMEs, it seemed to have recognised the critical role of the sector in taking the nation to $5 trillion economy. Millions of MSME units present in India today will hopefully benefit the proposed Union Budget upon implementation and we shall have all-encompassing growth in the country.
