BUDGET 2023: Budget 2023: Abolition of key schemes MSMEs worry, say industry experts

Over the years, the government has announced a number of schemes to boost the MSME sector, but has also scrapped many useful ones, say industry experts. Key schemes such as 2% interest subsidy for all GST-registered MSMEs and interest subsidy for incremental loans could have been extended to support the sector which is currently struggling in the face of multiple domestic and global challenges, they pointed out.

“I would wonder why the MSME programme, which provides a 2% interest subsidy for incremental loans to MSMEs, was also terminated and never extended thereafter. I believe this and interest subsidization for incremental loans are incentives for the sector to invest more, build more capacity, buy new technologies, etc,” said Rajiv Chawla, founder and chairman of IamSMEofIndia, at ET Online’s Rising Bharat Summit.

The 2% interest subsidy scheme was announced by the government in November 2018 and was in place till 31 March 2021. It was launched to provide MSMEs with interest on their outstanding fresh or incremental loans or working capital up to Rs 1 crore.

“Maybe the government lacks the budget, maybe they think the schemes have outlived the utilities for whatever reason.” I believe the MSME sector is really missing these fine schemes,” Chawla said, adding that MSMEs now require more hand-holding than before.
Apart from revisiting these schemes, the government should also look beyond production-linked incentive (PLI) type schemes, said Anil Bhardwaj, general secretary of the Federation of Indian Micro Small and Medium Enterprises (FISME). “For the MSME sector to grow, PLI-type schemes would not be of much help as they require very high costs to reap the benefits,” he said.

How are the earlier launched MSME schemes progressing?

In Budget 2022, the government announced measures such as the Emergency Credit Line Guarantee Scheme (ECLGS) for Covid-affected MSMEs. Another facility was launched on 21 August 2020 to restructure loans without downgrading existing asset classifications to help MSMEs cope with the post-pandemic recovery. However, the scheme was discontinued on 30 September 2021. Commenting on how the earlier launched MSME schemes performed and whether they had the desired results, Madan Padaki, Co-Founder and CEO of the Global Alliance for Mass Entrepreneurship (GAME), said, “I think some of the schemes, especially the post-Covid ECLGS scheme, have somehow ensured that credit is available to MSMEs affected by the pandemic in emergencies. I think we’ve seen a lot of uptake from that scheme and we’ve really seen MSMEs benefit from these schemes. So I think some of these things worked to a certain extent. But my key takeaway from all these schemes is that even at the center and state level there is no dearth of schemes on paper. What really matters is how it reaches the ground — what awareness is created and how it is implemented on the ground,” he added.

Challenges for MSMEs

Commenting on the challenges faced by small businesses, FISME’s Bharadwaj said that while several segments in the MSME sector have recovered, others are still struggling. “Some exporters or suppliers are affected, especially those operating in Europe.” Consumer spending, as you know, has been affected by high inflation there, and industrial sectors have been affected by energy shortages amid the ongoing war between Russia and Ukraine.

A large number of product categories that were historically reserved for small-scale industries, now called MSMEs, suffer from technological deficiencies. “So a huge technological upgrade is required,” he added.

ETRise MSME Day 2022 Mega Conclave with Industry Leaders. Watch now.

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