MSMEs make up much of the manufacturing industrial sector that has been lying dormant for reasons ranging from non-availability of credit to incentives that will make them viable. They are also the units that have not cared to expand in the face of prevailing labour law reform uncertainty.
Along with being the sector that provides employment, MSMEs, according to the Federation of Indian MSMEs, contribute over 8 per cent to the GDP. However, owners of small units see themselves almost being in the same precarious condition as farmers.
The World Bank has estimated that the gap between supply and demand for credit in the MSME sector is over $230 billion.
Minister without Portfolio Arun Jaitley described the MSME sector as a “major engine of growth and employment generation” last year, and announced an allocation of Rs 37,794 crore for credit support and interest subsidy on innovation, as well as towards capital support, in budget 2018. The MSMEs however, had less than 18 per cent of the credit outlay, with the large enterprises—which have run up the NPAs—hogging the rest.
Most of the units in the MSME sector were hit hard by demonetisation. According to the FIMSMEs, many industry bodies have submitted their list of expectations or demands to the Union finance ministry, with hopes that the interim budget on Feb 1, 2019, bodes well for the sector. According to one representative who was in the delegation, they have made a case for Rs 25,000 crore by way of capital, and sought a write-off for loans that form part of NPAs.