India’s finance minister’s moves will help msmes emerge stronger

Across the world, micro, small and medium enterprises (MSMEs) play an important role in the development of an economy.

They help in job creation while keeping a tab on poverty and inequality.

Contribute to GDP

This is true for India too as MSMEs contribute to more than a third of the country’s GDP.

With more than 63 million units, they account for 90 percent of the total number of enterprises in the country and provide jobs to 111 million people.

Given the crucial role that they play, the sustainability of SMEs is the foremost concern of any government.

Challenges

The COVID-19 pandemic unmistakably brings two aspects to the forefront—the scale of the sector and its sheer vulnerability.

Even in the pre-Covid-19 phase, several studies pointed to challenges faced by the sector.

The repeated concerns always stated that MSMEs continue to face multiple challenges:

■Busi■ess environment including low level of formalisation, limited availability of skilled manpower, weak policy and legal framework and weak support institutions

■Access to finance including limited access to bank credit, lack of risk capital, limited financing in rural areas

■Market access constraints including access to domestic and international markets and low capacity to innovate among others.

Start-ups

The government has announced programmes in the past to tackle these very challenges, including MUDRA, Start-up India and Skill India. MSME development is also among the stated objectives of large pan-national programs such as the ‘Make in India’ and ‘Digital India.’

While the challenges remain, the COVID–19 situation amplifies their impact and raises questions on the survival of several MSME enterprises. This explains why the Finance Minister’s announcements were anticipated by many.