Extensive intervention by the central government and central bank is a common phenomenon noticed in almost every economy that suffers through a fiscal dry patch. India is no different in that respect.
Having recognised the MSME sector as the quintessential sector that can drive economic growth, both RBI and GOI have introduced and implemented several measures to leverage this sector.
The development of this sector that provides employment to more than 111 million individuals across India and accounts for over 40% of India’s exports can provide the economic boost that India needs currently.
Measures that could potentially drive MSME growth include Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Trust Fund for Micro and Small Enterprises (CGT SME), etc.
For instance, under CGTSME, the Government of India endorses security of 75% of the business loan amount that SMEs avail under that scheme. Thus, it encourages lenders to advance business credit to SME units.
Another scheme which significantly benefits the MSME sector is the PMEGP scheme. Under this scheme, MSME units can avail a subsidy of up to 35% on business credit that they avail to account for the cost ofa project or unit.
However, above Rs.25 lakh for manufacturing sectors and Rs.10 lakh for service sectors, business owners can resort to a term business loan to tide over the cost of a project.
Furthermore, GOI also provides a subsidy of 15% to MSEs for technology upgradation under the Credit-linked Capital Subsidy for Technology Upgradation (CLCSS).
These schemes, if utilised appropriately, can provide significant leverage to MSME business owners to enhance their businesses’ profits as well as drive the nation’s economy forward.