EXTENSION OF CREDIT FACILITY TO MSME SECTOR IS JUST AN EYEWASH ACCELERATED SUPPORT REQUIRED IN PLACE OF SLOW PACED ONES

The Union Government of India has just extended the validity of a key scheme bolstering equity support to Micro, Small and Medium Enterprises (MSMEs) for one year by facilitating Rs20,000 crore as subordinated debt which will now remain in force until March 31, 2023. The government that has been helping the sector at too slow a pace to help them survive, has even made statements as if they are doing a great thing, while the fact is that the Government of India does not even maintain the latest data about the MSMEs or job losses in them and therefore all their planning were planned and being implemented in the dark and does not meet the requirement on the ground.

One of the latest glaring example is usage of the six year old data of the National Sample Survey 73rd round conducted for the FY16 that reported existence of 6.33 crore unincorporated non-agriculture MSMEs in the country. The latest Ease of Doing Business for MSMEs annual report for the year 2021-22 has used that old data which is far removed from the ground reality. Modi government is perhaps afraid of using the latest data because the demonetization of 2016 had effected closure of millions of MSMEs, and millions others have been struggling to survive since then, and the situation was further worsened after implementation of GST without preparation in 2017, and lock down without preparation in 2020. The real current data on the status of MSMEs and job loss would have exposed the Modi government.

The subordinated debt scheme that has just been extended was aimed at benefitting only 2,00,000 stressed MSMEs and the amount earmarked was only a paltry Rs20,000 crore. Extension was made because of slow pace of its implementation, as in the case with Emergency Credit Line Guarantee Scheme (ECLGS) of Rs3 lakh crores collateral free Automatic loans for business including MSMEs for the year ending March 2021, which was extended upto March 2022 and was expanded to Rs4.5 lakh crore, now expanded to Rs 5 lakh crore for the year 2022-23. However, targets have never been achieved. Under ECLGS progress was dismal, and only Rs 2.82 lakh crore were sanctioned till November 12, 2021, of which only Rs 2.28 lakh crore was disbursed.

MSMEs have always been finding hard to get credit from banks, especially after the general lockdown of the country from March 24, 2020 after the outbreak of COVID-19, which hit them the hardest. Closures of the units made them even defaulters on loan repayment, and Modi government had announced the subordinated debt scheme as part of Atmanirbhar Bharat Package.

Modi government has always been claiming that a number of initiatives under Atmanirbhar Bharat have been taken for creation MSMEs and job creation. On the one hand the plans are defective on account of the unavailability of the current data, as is self-evident from the annual report for the year 2021-22 on Ease of Doing Business for MSMEs which has also shared data relating to expenditure on major schemes for the nine-month period ended December 2021.

Modi government had more than doubled the budgetary allocation for the current financial year 2021-22 to Rs15,700 crore from Rs 7,572 crore in 2020-21, but actual expenditures remained meagre in several key schemes. For example, the Entrepreneurship and Skill Development Programmes aiming to promote new enterprises, building capacity of existing MSMEs and inculcate entrepreneurial culture spent only Rs1.83 crore out of Rs10 crore allotted. Rs19.43 crore were allocated for MSME competitive scheme for technological upgradation and competitiveness, but spent only Rs1.61 crore. Similarly ASPIRE scheme, which worked on setting up business incubators and looked at the commercialization of business ideas incurred and expenditure of only 4.31 crore as against an allocation of Rs 15 crore.

MSME-Innovative (Incubation), MSME-Innovation (Design), and MSME-Innovative (IPR) schemes that catered to awareness and development of incubation, product design, and intellectual property rights ecosystem for MSMEs saw an expenditure of Rs 1.52 crore, Rs 2.36 crore, and Rs 0.14 crore out of the allocated Rs 23.16 crore, Rs 15.21 crore, and Rs 25.57 crore respectively. The MSME Sustainable certification scheme to promote Zero Defect Zero Effect practices among MSMEs witnessed zero expenditure out of Rs 16 crore allocated.

Though other several other schemes for MSMEs reported relatively higher expenditure, it was still not satisfactory, for instance, Prime Minister Employment Generation Programme (PMEGP) could spend only 71 per cent, SME division only 52 per cent, Agro and Rural Industry division only 58 per cent, while overall expenditure of the MSME Ministry was only 68 per cent till December 2021.

The record shows how little Modi government is supporting MSME sector in the country to survive which employs over 90 per cent of the workforce in non-agriculture activities. It is therefore no wonder as to why MSMEs in the country are struggling to survive. Even gross non-performing assets of MSMEs or loans defaulted, rose by Rs 20,000 crore to Rs 1,65,732 crore as of September 2021, from Rs1,45,637 in September 2020. According to the RBI, bad loans of MSMEs now account for 9.6 per cent of gross advances of Rs 17.33 lakh crore as against 8.2 per cent in September 2020, and Rs 1,47,260 crore (8.8 per cent of advances) in September 2019.

No doubt, MSMEs in India need accelerated real support on the ground, not only high sounding names and numerous schemes in speeches and papers. It is key to the employment generation in large number to overcome joblessness in the country.

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