The Govt’s Support is Integral to MSMEs Growth in India

One of the key initiatives, the Emergency Credit Line Guarantee Scheme (ECLGS), is a crucial lifeline for over 130 lakh MSMEs in the truest sense.

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Mr. Roshan Shah, Co-founder & CEO, VoloFin

Mr. Roshan Shah, Co-founder & CEO, VoloFin

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Micro, Small, and Medium Enterprises (MSMEs) are integral to India's economic development, constituting 30% of the GDP and employing around 11 crore people. They are the backbone of the economy, and the government is making concerted efforts to support their growth through various measures directed towards enhancing credit flow and ensuring financial assistance.

MSMEs' credit access struggles are significant

In India, the trade finance gap is high. The impact of this phenomenon on small businesses is deep as they struggle due to inadequate access to traditional banking. Hence, they have insufficient credit and liquidity. There are approximately 63.4 million MSMEs, but only 15-20% have access to formal credit. Realizing their vital role in the country’s economic prosperity, the Indian government has launched several initiatives to boost MSMEs’ growth. These efforts  aim to offer them the advantages of the different schemes, with the sole aim of fostering a supportive ecosystem for these enterprises.

The Emergency Credit Line Guarantee Scheme (ECLGS)

One of the key initiatives, the Emergency Credit Line Guarantee Scheme (ECLGS), is a crucial lifeline for over 130 lakh MSMEs in the truest sense. As a part of the Aatmanirbhar Bharat Abhiyaan, this scheme strives to provide financial assistance to overcome operational limitations and acts as a lifeline for businesses that suffered in the wake of the global pandemic. The scheme also expanded the guarantee cover of INR 50,000 crore to a total cover of INR 5 lakh crore. Until March 2023, Rs. 3.61 lakh had been issued, benefiting 1.19 crore MSMEs. Initiatives like the ECLGS highlight the government’s commitment to empowering small and medium enterprises.

The Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE)

The Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) is another major scheme that was introduced to strengthen the credit delivery system and facilitate credit flow to unserved, underserved, and unprivileged MSMEs. The scheme has been providing guarantees on credit for loans up to INR 2 crore for more than two decades now, eliminating the need for third-party guarantees and collateral. Various initiatives are launched under the scheme that have been instrumental in achieving the milestone of approving guarantees worth Rs. 1.50 lakh crore in the current financial year, breaking all records and exhibiting a sharp 50% increase from Rs. 1.04 lakh in FY 2022-2023. CGTMSE provides financial support to MSMEs and intends to build a conducive environment that ensures the sustenance and development of these enterprises.

The Raising and Accelerating MSME Performance program (RAMP)

The Raising and Accelerating MSME Performance (RAMP) program was launched in 2022. This World Bank-assisted central government program was introduced with the objective of improving access to credit, addressing the issue of delayed payments, and elevating the current state of MSMEs by promoting tech upgradation, innovation, and digitization. Backed by a noteworthy INR 6,000 crore investment, this is a pivotal initiative that will revolutionise the MSME sector in the times to come. Designed to enhance their competitiveness and overall performance, RAMP highlights the dedicated commitment to bolstering the resilience of MSMEs, indicating a new era of progress.

Self-Reliant India Fund

Launched as a part of the Aatmanirbhar Bharat initiative in 2021, the government plans to boost MSME growth by providing Rs. 50,000 crore as equity funding for MSMEs that have the potential and viability to prosper and grow. Until last year, the total equity infusion under the fund had reached Rs. 4,885 crore. The fund is strategically designed to empower MSMEs to effectively tackle challenges and seize growth opportunities. The initiative intends to support small businesses that will make India self-reliant by producing relevant technologies, goods, and services. The move signals the government’s dedication to ensuring the financial stability of MSMEs, supporting their sustainability, and fostering overall economic development.

Udyam and integrated platforms: Initiatives to bring informal Micro Enterprises into the formal segment

To improve credit accessibility for MSMEs and boost their development, the government is introducing several initiatives in addition to the schemes, one of which being integrating key portals. Udyam, e-Shram, National Career Service (NCS), and Aatamanirbhar Skilled Employee Employer Mapping (ASEEM) will now be interlinked, operating as interconnected platforms. These portals with live and organic databases provide seamless user experiences and offer G2C, B2C, and B2B services pertaining to credit accessibility, skilling, and recruitment.

Additionally, the government has launched the Udyam Assist Platform (UAP) to bring Informal Micro Enterprises (IMEs) into the formal ambit. This platform strives to bridge the gaps and integrate IMEs into the formal economy, and provide them with access to financial resources and support.

To sum up

The government’s priority is the development of MSMEs and is making all ends meet to ensure they grow and prosper at global levels. With this vision in mind, ensuring adequate financial assistance, relevant technologies, and training for MSMEs has been a key objective in this year’s interim budget. Even for FY25, the government has allocated Rs. 22,137 crore to the MSME ministry. After introducing a slew of initiatives, this is a welcome move, signifying its commitment to fostering the growth and resilience of MSMEs in India. By addressing critical challenges like credit support, equity infusion, and service integration, the government will create a thriving environment for MSMEs through its targeted measures and further pave the way for the nation’s economic prosperity.