Context

Central government has launched the support and outreach initiative for MSME sector:

• The outreach programme to MSMEs will run for 100 days covering 100 districts.
• As a part of support government has announced 12 key initiatives for the MSMEs

About

Why reform and outreach initiative?

• The Indian MSME sector provides maximum opportunities for both self-employment and wage employment outside the agricultural sector
• The sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country
• With 38 per cent contribution to the nation's Gross Domestic Product (GDP) and 40-45 per cent share of the overall exports and manufacturing output respectively, the sector plays a key role in our economy
• Besides the wide range of services provided by the sector, it is engaged in the manufacturing of over 6000 products ranging from traditional to hi-tech items.
• Compare to big corporate, MSMEs have more tendencies to have trickle–down effect.
• Slower credit growth for MSMEs compared to other non-food credit growth needs timely intervention for continued thriving of this sector.  

Outreach programme

• The Prime Minister has launched a historic support and outreach programme for the Micro, Small and Medium Enterprises (MSME) sector.
• The outreach programme will run for the next 100 days, covering the entire country. It is expected to provide even greater synergy to the efforts being made for this sector.
• The progress of this programme, to be implemented in mission mode, will be monitored on a continuous basis by senior officials of Union and State Governments.

Support Initiative

The programme underlined the five key areas for Support/facilitating MSME sector. These include:

Access to Credit

• Government announced the launch of the 59 minute loan portal to enable easy access to credit for MSMEs. Loans upto Rs. 1 crore can be granted in-principle approval through this portal, in just 59 minutes. Government will provide link to this portal available through the GST portal as well. The idea is to reduce the physical appearance of the customers at the bank branches for loan approval through seamless and transparent mechanism.
• The Prime Minister mentioned the second announcement as a 2 percent interest subvention for all GST registered MSMEs, on fresh or incremental loans. For exporters who receive loans in the pre-shipment and post-shipment period, the Prime Minister announced an increase in interest rebate from 3 percent to 5 percent.
• All companies with a turnover more than Rs. 500 crore, must now compulsorily be brought on the Trade Receivables e-Discounting System (TReDS). Joining this portal will enable entrepreneurs to access credit from banks, based on their upcoming receivables. This will resolve their problems of cash cycle.

Access to Markets

• Public sector companies have now been asked to compulsorily procure 25 percent, instead of 20 percent of their total purchases, from MSMEs. out of the 25 percent procurement mandated from MSMEs, 3 percent must now be reserved for women entrepreneurs.
• It has been made mandatory for the companies to take GeM (Government e-Marketplace) membership now. Not only this, but the companies will now have to register their all MSME vendors on this platform, which will also benefit the MSMEs.

Technology Upgradation

• Government has announced Rs 6000 crore package for the technological upgradation in connection with MSME. 20, 000 hubs and 100 tool rooms that will be developed around the country.

Ease of Doing Business

• Government announced MSME sector’s ease of doing business to pharma companies. Reform of processes will help small and medium enterprises (MSMEs). Clusters will be formed of pharma MSMEs. 70 per cent cost of these clusters will be borne by the Union Government.
• Air pollution and water pollution laws have been merged as a single consent for establishing a business. This would come as a relief for the entrepreneur who needs clearances such as environmental clearance etc.
• Under Companies Act, minor violations would be corrected through simple procedure rather than going to the courts.

Social Security for MSME Sector Employees

Mission will be launched to ensure that workers will have Jan Dhan Accounts, provident fund and insurance.

12 key initiatives for MSMEs Government announced the launch of 59-minute loan portal for sanction of up to Rs 1 crore for small and medium enterprises. GST-registered MSMEs will get 2 per cent rebate on an incremental loan of up to Rs 1 crore. Government has decided to increase interest Subvention on pre and post shipment credit for exports by MSMEs from 3 per cent to 5 per cent. It is now mandatory that all the companies with a turnover of more than Rs 500 crore will have to join TReDS platform, that is Trade Receivables e- Discounting System. So that MSMEs doesn’t face trouble in cash flow. Mandatory sourcing by PSUs from MSMEs increased to 25 per cent from the previous limit of 20 per cent. Government companies now have to buy at least 3 per cent of their purchases from women entrepreneurs. It has been made mandatory for the companies to take GeM (Government e-Marketplace) membership now. Not only this, but the companies will now have to register their all MSME vendors on this platform, which will also benefit the MSME. Government has announced Rs 6000 crore package for the technological upgradation in connection with MSME. 20, 000 hubs and 100 tool rooms that will be developed around the country. Government announced MSME sector’s ease of doing business to pharma companies. Reform of processes will help small and medium enterprises (MSMEs). Environment clearance and ease of self-certification. MSMEs will have to file just one annual return on eight labour laws and 10 central rules.   Government has made a big change to Companies Act and provided relief to MSMEs from legal complications.

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