The Micro, Small, and Medium Enterprises (MSMEs) sector is redefining business growth for the Indian economy. Currently, there are 633.9 lakh MSMEs in India. They contribute 30% to the country’s Gross Domestic Product (GDP) and employ more than 93 lakh people. It is not surprising that India has introduced several Govt MSME schemes over the years to support this sector.
The government provides financial, technological, marketing, and skill development assistance through various initiatives. Here are five new govt MSME schemes that can help to boost the growth of your MSME:
1. Raising and Accelerating MSME Performance (RAMP)
This is a World Bank-assisted scheme to offer financial aid to MSMEs to strengthen and uplift them after the COVID-19 pandemic. It has an outlay of Rs 6062.45 crore of which the World Bank will contribute Rs 3750 crore while the Indian government will fund the balance amount. As of now, MSMEs from five states – Tamil Nadu, Gujarat, Punjab, Rajasthan, and Maharashtra can avail of this scheme.
Benefits to MSMEs:
- Availability of a formal source of credit for liquidity and working capital
- Increase in implementation capacity and coverage across India
- Easy access to technology upgradation
- Reduction in incidents of late payments
- Support for a shift to environmentally-sustainable products and services
Read more about this scheme here.
2. Credit Guarantee Scheme for Subordinate Debt (CGSSD)
This govt MSME scheme aims to extend credit facilities to stressed MSMEs through lending institutions. Your MSME should fall into an existing or potential Non-Performing Asset (NPA) category to get this credit. Under this scheme, the promoters of such MSMEs will get a personal loan (sub-debt) to infuse equity in the business. However, your business should be eligible for restructuring as per Reserve Bank of India (RBI) guidelines for restructuring stressed MSME loans.
Benefits to MSMEs:
- Availability of credit equal to 15% of promoter’s stake (equity plus debt) or Rs75 lakhs, whichever is lower
- A good credit alternative when banks and other financial institutions reject an outright loan to the promoters
- A lifeline for MSMEs to revive and function sustainably
3. Emergency Credit Line Guarantee Scheme (ECLGS)
This scheme offers a 100% credit guarantee through unsecured loans to MSMEs to help them mitigate losses incurred during the COVID-19 pandemic. This means that you don’t require placing any collateral to receive the loan. This loan is available through scheduled commercial banks, financial institutions, and non-banking financial companies. The initial outlay of this scheme was Rs 3 lakhs crore which has been now expanded to Rs 5 lakh crore. If your MSME operates in hospitality or related enterprise, there is an additional guarantee cover of Rs 50,000 crore.
Benefits to MSMEs:
- Pre-approved, collateral-free loans at a nominal interest rate
- Credit for working capital needs and operational costs
- Zero processing, foreclosure, and part-payment fees
- Opportunity to restart the business after the pandemic
4. Self Reliant India (SRI) Fund
This is one of the most popular govt schemes for MSMEs. It is a Category II Alternative Investment Fund that enables MSMEs to secure growth capital in the form of equity, quasi-equity, or debt. SIC Venture Capital Fund Limited, a wholly-owned subsidiary of The National Small Industries Corporation Limited (NSIC) is the anchor investor of SRI.
Benefits to MSMEs:
- Opportunity to raise capital through market-linked instruments
- Higher capital pool to reach full business potential
- Move from the MSME bracket to national/international companies
5. MSME CHAMPIONS
The purpose of this scheme is to help MSMEs solve grievances, capture new opportunities, and encourage them to become national global players. It also provides them support for entrepreneurial challenges related to the procurement of finance, manpower, raw materials, regulatory permissions, etc.
The CHAMPIONS stands for ‘Creation and Harmonious Application of Modern Processes for Increasing Output and National Strength’. It is a technology-enabled control room cum management information system. It leverages new-age Information and Communication Technology (ICT) tools such as artificial intelligence, machine learning, and data analytics.
MSME CHAMPIONS has three components:
MSME-Innovative (Incubation, Design, IPR)
This component aims to create awareness among MSMEs about innovation in incubation, design intervention, and protection of Intellectual Property Rights (IPR). It acts as a single hub to guide MSMEs to transform their ideas into viable business propositions. MSMEs can avail of financial assistance in each of these verticals, subject to various terms and conditions.
MSME-Sustainable (ZED) Certification
This component aims to create awareness among MSMEs about Zero Defect Zero Effect (ZED) practices. The objective is to enable MSMEs to develop high-quality products with minimum impact on the environment. This will help them to become more competent in the market and increase their exports. There are three certification levels – bronze, silver, and gold. The government incentivizes MSMEs with additional subsidies when they achieve ZED certification.
MSME-Competitive (Lean)
This component aims to create awareness among MSMEs to improve their competitiveness through lean manufacturing tools and techniques. This will further enable them to upgrade the quality of their products, enhance productivity and utilize their resources effectively. MSMEs can get financial assistance and subsidies for the adoption of these tools and techniques.
Apart from these five govt MSME schemes, several other aids and resources are available in India for MSMEs. The government has also announced other programs and reforms for the MSME sector in the Union Budget 2023-24. A few such proposed initiatives are:
Dispute resolution scheme for commercial and contractual disputes under the ‘Vivad Se Vishwas-2’ scheme:
- Setting up of an entity called ‘DigiLocker’ to enable MSMEs to store and share their documents securely
- Increase presumptive taxation limit for MSME
- Allowance to deduct expenditure incurred on payments made to MSMEs only when the actual payment is made
Conclusion
The Indian MSME sector is witnessing fast-track growth and holds a promising future. There is no doubt that the government is investing significant efforts to uplift MSMEs and increase their share in the national economic structure.