msme engines of growth for new India

1. MSMEs: Engines of Growth for New India The Indian economy's growth engines are micro, small, and medium-sized businesses (MSMEs), which contribute around 30% of the nation's GDP (GDP). They provide roughly 40% of total exports and are a crucial link in the supply chain in terms of exports. MSMEs, which employ nearly 110 million people nationwide, also contribute significantly to the creation of new jobs. It's interesting to note that MSMEs are entangled with the rural economy as well because more than half of MSMEs in India are located there. Previously, the categorization of an MSME unit was based only on its investment in plant and machinery, as well as whether the firm was in the manufacturing or services sectors. The Government of India periodically announces various programmes to encourage development of this sector in order to make sure that MSMEs continue to drive the nation's economy toward growth. A few programmes under the "Aatmanirbhar Bharat" plan, or Self-reliant India initiative, have recently been introduced by the government in response to the economic hardship brought on by COVID 19. As a result, the MSME classification criteria have also been updated. To establish whether a firm should be categorised as a micro, small, or medium enterprise, the combined elements of "Investment in plant and machinery" and "Turnover" must be taken into account under the updated criterion. According to the revised definition, the following units will now be classified: Micro companies - less than '1 crore in investment and less than '5 crore in revenue Small businesses - less than '10 crore in investment and less than '50 crore in revenue Medium companies - less than '50 crore in investment and less than '250 crore in sales As a move toward making doing business in India easier, the government has determined that export turnover would not be included in the previously mentioned turnover restrictions for MSME firms. The 'investment in plant and machinery' would be computed in accordance with Income-tax rules, and the 'turnover' would be calculated in accordance with the GST return. If a company categorised in one category exceeds the stated restrictions for either investment or revenue, it will be moved to the next higher category. An enterprise, on the other hand, must be put in the lower category only if both working capital income and turnover fall below the ceiling stipulated for the relevant category. Registration Requirement From 1 July 2020, all current and new MSMEs must receive 'Udyam' registration, which is a simple online registration based on self-certification. The Aadhaar number is required to get the Udyam registration application. In the case of a proprietor, the Aadhar number would be that of the individual. In the event of a Hindu Undivided Family (HUF), the Karta's Aadhaar number would be used, whereas in the case of a partnership company, the controlling partner's Aadhaar number would be used. In the event of a business, a limited liability partnership, a cooperative society, a society, or a trust, the Aadhar number of the entity's authorised signatory must be supplied. After registration is completed, an e-certificate titled 'Udyam Registration Certificate' will be issued to the MSME unit. Though Udyam registration for MSMEs is voluntary, an MSME unit is entitled for a variety of registration-based advantages, which strengthens the rationale for acquiring such registration.

2. Advantages of MSME Registration One of the primary advantages of registering as an MSME unit is that under the MSME Act, payment for invoices is guaranteed within 45 days in the case of Micro business firms. If payment is not made to the MSME within 45 days, the buyer must pay interest charges with monthly rests to the MSME on the invoice value at three times the Reserve Bank of India's stated bank rate. Government departments and public sector enterprises are required to source 25% of their needs from MSMEs; hence, registration offers them an advantage when submitting tenders in such circumstances. With the present economic situation in mind, the government has announced additional steps to assist the MSME sector. These include programmes for emergency financial inclusion, equity support, and increasing procurement from the MSME sector, among others. The main schemes are listed below. Credit availability Access to financing has been one of the most pressing issues for MSMEs. To solve this issue, the government has launched an emergency credit line for businesses/MSMEs, with banks/financial institutions proposing to authorise business finance loans of up to '3 trillion. Under this arrangement, the government will guarantee 20% of outstanding loans as of the cut-off date of February 28, 2020, and banks will be authorised to lend without further guarantees. Subordinate debt plan As a result of the ongoing epidemic, promoters are unable to secure equity finance. To aid the promoters, the government has enacted further subordinate debt measures. The subordinate debt plan intends to assist promoters by offering a lending facility of up to 15% of the promoter contribution or '75 lakh, whichever is less. Under this arrangement, banks will be allowed to fund the promoter's contribution, and the financing will be guaranteed by the government. In some ways, the government is providing equity assistance, while banks are not incurring any more risk. Funds of Fund The government has also established a Funds of Fund Scheme with a capital of '10,000 crore for giving financial assistance and finance to MSMEs with development potential and viability. This first corpus of money would be handled by a' mother fund' in order to generate a further corpus of '50,000 crore at daughter fund levels. CHAMPIONS portal is now up. Another noteworthy development is the launch of a new portal solely dedicated to the MSME sector. The basic goal is to assist MSMEs with financing, raw supplies, labour, permits, and so on. The portal also aims to assist MSMEs in tapping into new prospects, such as the manufacture of medical goods and accessories, with a long-term goal of identifying MSMEs with development potential. PSUs clearing payments more quickly To boost MSMEs' liquidity, the government has instructed that sums owed by the government and public sector entities be paid within 45 days after acceptance of goods/services. No worldwide bids up to '200 crore.'

3. As part of the Aatmanirbhar Bharat package, the government changed the General Financial Rules 2017 to prohibit worldwide tenders in government procurement up to '200 crore. This audacious step is likely to increase prospects for domestic players and benefit the local sector. The World Bank has awarded over '5,600 crore ($750 million) in emergency response assistance to the MSME sector. This offers much-needed liquidity and supports the government's aim of employing NBFCs and small banks to route financing to MSMEs. Conclusion MSMEs (Medium, Small, and Micro Enterprises) have long been the Indian economy's backbone. They have made significant contributions to achieving socialistic goals such as income equality, job creation, poverty elimination, and sustained growth. MSME's play a key role in the Indian economy in terms of output, export, and job creation. MSMEs make the most significant contribution to balanced economic growth in India. While major corporations contributed significantly to the creation of the Islands of Prosperity in impoverished India, small businesses have been successful in meeting the socialistic goals of ensuring balanced and fair growth.