Recently, the Government of India launched the Atmanirbhar Bharat Abhiyan package to release the pressure on MSMEs including Agri–based businesses, amidst the COVID -19 Pandemic scare. MSMEs have less cushioning against disasters like pandemics and this package has been created with an intent to provide much needed relief.
The main takeaways of the most recent announcement are the revising of MSME definition and raising the limits.
- Upto Rs. 1 crore investment and Rs. 5 crore annual turnover limit for micro units.
- Upto Rs. 10 crore investment and Rs. 50 crore annual turnover for small units.
- Upto Rs. 50 crore investment and Rs. 250 crore annual turnover medium-sized enterprises.
- The limits will not include revenue from exports, i.e. Micro, Small and Medium Enterprises (MSMEs) can freely sell overseas without losing any benefits.
Apart from these pointers, the announcement for Rs. 20,000 crore unsecured debt fund and Rs. 50,000 crore fund-of-funds were also made so that MSMEs can get equity support. Note that MSMEs account for about 30% of the national GDP and nearly 45% of total manufacturing output.
These measures are set to improve the condition of almost 45 lac units across the nation and help them get back to business. But things will not begin improving immediately.
The road ahead for MSME recovery might look like this:
- Solving liquidity issues: The extra money pumped in the banking system by RBI could cure the liquidity problem that happened during the lockdown from late March until mid-May because of delayed payments and pay. The loans being offered could prove a quick-fix, short-term solution to the problem of the cash crunch.
- Exports not counted in turnover limits: Once the liquidity issue is sorted, MSMEs can focus on exports, without the fear of losing any benefits due to increased turnover.
- Payment from Govt. to MSMEs: The dues on the Government are huge–about 4.95 lac crore rupees are yet to be refunded to MSMEs. The Ministry announced that they will pay the outstanding money immediately to the organizations and help take them out of the pressures of a cash crunch in business.
- Fund of Funds: A fund of funds worth Rs. 50,000 crores for MSMEs with growth potential and viability has been created. A part of this is being directly contributed by the Government, SBI, LIC, and other organizations. This fund infuses equity to help MSMEs expand.
- NPA is not a problem: If you are a working MSME, but classified as NPA, you are still eligible for funding.
The road ahead looks challenging, but for B2B businesses there is hope. Exports should be the prime focus. Making in India and selling abroad should be the aim. These steps are being taken at the right time to ensure the businesses don’t take a hit and the economy doesn’t collapse. The Government organizations are working hard to get the benefit to the public in phases and not overwhelm the entire system.
How will this massive infusion work towards the benefit of the MSMEs? We will have to wait and watch for that. But in the meantime, you can take advantage of the B2B platforms to expand your reach and build new trade connections in India and outside.