On 28 June, the union finance minister Nirmala Sitaraman announced economic credit stimulus packages or measures to help or support the micro, small and medium enterprises(MSME). The union finance minister introduced these stimulus packages worth rs 6.29 L crore to give support to the struggling sectors of the enterprises due to the second wave of the covid 19 pandemic.
Going ahead on this particular topic, we need to understand all about the MSME(micro, small and medium enterprises).
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About the MSMEs :
This initiative is launched by the Indian government in order to support small enterprises. Our government has created an additional ministry for these enterprises, which is MSME enterprises. It has been established by the government under the micro, small and medium enterprises(MSME) act, 2006. This ministry has its headquarters in New Delhi. The MSMEs ministry is the main executive body for the administration of enterprises. As per the data by the ministry of statistics, MSMEs have the maximum contribution to our country’s GDP. It is the backbone of our country’s GDP.
Key ideas for MSME establishment :
The main ideas behind its creation are to manage the MSMEs on the ground level. MSME ministry frames the laws for the enterprise, it regulates and administers the rules of laws for all small-scale enterprises. And its main function is to register the enterprises or firms that intend to run the business in the Indian market.
Criteria for the MSME :
om 13 may, 2020 under the Atma Nirbhar Bharat package revised the MSMEs criteria. After the announcement of the package, there were a number of representations for upward revision of the MSME definition. And this new revision of the definition and criteria for the MSMEs came into operation on 1st July 2020.
Let’s see the gist of the revision criteria :
- According to the notification, Enterprises under the MSMEs are classified on the composite criteria of investments made in the firms or plants, machinery and the annual turnover.
- In the new definition of the MSMEs, exports will be counted in terms of turnover for the companies or firms.
- Now the government has announced the composite criteria for the classification of MSMEs. Here the ministry has vanquished the difference between the enterprises based on manufacturing and the services used by the consumers under the MSMEs.
- Earlier was based on the MSMED act, 2006. and it was different.
- The other changes are the turnover of the enterprises will define the MSMEs, till now, the investment of enterprises was defined by the classification of MSMEs, but now the investment along with the annual turnover will define the MSMEs.
Earlier there were the other criteria for the MSMEs sectors but now after the introduction of new or revised criteria, things are a bit different. In the revised criteria, now the number of enterprises can avail of the MSMEs benefits and also get the additional financial support. in the revised criteria, the things are below :
For the micro-enterprises sectors: the investment in the plant or machinery should be less than Rs 1 cr and turnover in the firm or machinery should be less than Rs 5 cr.
For the small enterprise sectors: here the investment should not be less than Rs 10 cr and the annual turnover is not less than Rs 50 cr.
For the medium enterprise sectors: the investment in the company or in the machinery should not be less than Rs 50 cr and the turnover in the plant should be below Rs 250 cr.
Being discussed on the MSME, let’s go to the key topics of this blog: Credit Stimulus Package for the MSMEs.
This credit stimulus package is the time demand for the MSMEs because of the pandemic.
This decision was taken to raise the scope of the emergency or temporary credit line guarantee scheme (ECLGS) to Rs 4.5 L crore from Rs 3 L crore earlier. This also included a credit guarantee for loans in banks to MFIs(Micro Finance Institutions) if they lend up to Rs 1.25 L to Rs 25 L to small-scale borrowers. Now out of the Rs 3 Lakh crore, an amount of Rs 2.7 lakh crore has already been sanctioned by the banks under the scheme of ECIGS. This package( Rs 4.5 Lakh crore sovereign guaranteed credit scheme for the small scale business)) could be extended by the government for the next financial year as per the current scenario pandemic is not over and this scheme increases the liquidity support to more than 10 million enterprises. It also protected more than 54.5 million jobs in India.
More about the ECLGS scheme :
ECL stands for Emergency Credit Line Guarantee Scheme, under this scheme micro, small and medium enterprises (MSME) are entitled to an extra 20 percent loan which is given by a sovereign guarantee.
This scheme that ends on 31 March 2022, could be extended for the next fiscal year because many companies or firms especially in the service sectors need such financial or liquidity support to combat the covid 19 pandemic.
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Emergency Credit Line Guarantee scheme has one of the main tools of the Rs 20 lakh crore economic stimulus package which comes under the atom Bharat Abhiyan that also provides the extra working capital finance which will be in the form of a term loan to the MSMEs. Earlier it was of Rs 3 Lakh crore and it was raised to Rs 4.5 Lakh Crore in the month of June after the 2nd wave of covid the union finance minister announced the 4th stimulus credit worth Rs 6.29 lakh crore.
Main intentions to introduce this package :
These schemes are aimed at the MSMEs sectors which were affected the most in this pandemic, and they rely more on credit than that of the direct stimulus measures. As we know that the measures are welcomed and targeted covid affected sectors, maximum financial support is still below the line and it is in the form of loan guarantees and not by the direct stimulus.
Final Thought
So in the entire blog, we have discussed all the credit stimulus package initiated by the government under the Atma Nirbhar Bharat package for the MSMEs along with the key factors involved in this package.
