Impact of aatmanirbhar bharat abhiyan on MSME.

The central government has announced a package of rupees 20 lakh crore under aatmanirbhar bharat abhiyan for implementing reforms across various sections including micro, small and medium enterprise industry and labourer and middle class and other. This package was worth a total of ten per cent of india gross domestic product and was announced in five instalments. The first tranche of the aatmanirbhar bharat abhiyan covers the support of rupees 3.7 lakh crore and various reforms for the micro, small and medium enterprise. This article explains the impact of aatmanirbhar bharat abhiyan on micro, small and medium enterprise and udyam registration.

Revision of micro, small and medium enterprise classification.

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The existing micro, small and medium enterprise classification was based on the criteria of investment in plant and machinery. So to enjoy the micro, small and medium enterprise benefit they have to limit their investment to a lower limit as mentioned below.

Existing micro, small and medium enterprise classification.

Because they cannot scale their business any further these lower constraints are destroying their will to expand. Also there has been a long pending demand for the revision of micro, small and medium enterprise classification so that they can further expand their operations while continuing to avail the micro, small and medium enterprise benefit. Now under the atma nirbhar bharat abhiyan the government revised the micro, small and medium enterprise classification by inserting composite criteria of both investment and annual turnover. Also the distinction between the manufacturing and the services sectors under the micro, small and medium enterprise definition has been removed. The sectors will be brought closer together as a result of this elimination. The following is the revised micro, small and medium enterprise classification where the investment and annual turnover both are to be considered for deciding an micro, small and medium enterprise.

Revised micro, small and medium enterprise classification.

The revision of micro, small and medium enterprise classification allows for further scaling of business and also increases a healthy competition among enterprise.

Emergency credit line to micro, small and medium enterprise.

Almost every micro, small and medium sized enterprise has been severely impacted by the pandemic. Additional money are needed to cover operational liability buy raw supply and re establish and begin operations. An emergency credit line of rupees 3 lakh crore has been made available to the enterprise and the micro, small and medium enterprise to support in this pandemic situation with these feature below.

This plan offers a no collateral as well as no guarantee automated loan with no new collateral required.

The credit line limit is 20 per cent of the entire outstanding credit as on the 29th of february, 2020.

Enterprise which has outstanding borrowings up to rupees 25 crore and turnover up to rupees 100 crore can avail this scheme.

The loan is for four years with a 12 month grace period on principal repayment and currently no interest cap.

The government will extend 100 per cent credit guarantee to banks and national banking financial corporation on principal and interest.

This offer will be accessible until the 31st of october, 2020.

This emergency credit line will assist about 45 lakh enterprise in resuming operation and safeguarding millions of job.

Debt for the stressed micro, small and medium enterprise.

The functioning micro, small and medium enterprise which are non performing assets and stressed need equity support to revive their enterprise. To support the micro, small and medium enterprise the central government will provide rupees 20,000 crore as subordinate debt. A subordinated debt is one owed to an unsecured creditor that can only be paid after secured creditors have been paid.

To implement this scheme the government will extend support of rupees 4,000 crore to credit guarantee fund trust for micro and small enterprise and then the credit guarantee fund trust for micro and small enterprise will provide partial credit guarantee support to bank. Finally the bank will give debt to the micro, small and medium enterprise promoter to infuse as equity in the unit.

The infusion of fresh capital into the business will reduce the burden on micro, small and medium enterprise and help to revive the business in a faster manner. This scheme benefit around two lakh micro, small and medium enterprise.

Equity infusion for micro, small and medium enterprise.

Micro, small and medium enterprise face a severe shortage of equity and the government is going to set up a fund of funds with a corpus of rupees 10,000 crore to overcome this struggle. Fund of funds will be operated and controlled through mother fund and few daughter funds. This fund structure will help in leveraging rupees 50,000 crore of funds at daughter funds level.

The micro, small and medium enterprise which has growth potential and viability will be identified to provide equity funding. Through this funding the micro, small and medium enterprise can expand their size as well as capacity. Also this will encourage micro, small and medium enterprise to get listed on the main board of stock exchange.

Limiting global tenders.

When there is a global tender for government procurement the indian micro, small and medium enterprise and company were not able to withstand the pressure of unfair competition from foreign company. This led to the discouragement of domestic company and micro, small and medium enterprise. To remove this unfair competition the government decided to disallow global tenders in government procurement tenders up to rupees 200 crore.

This move leads to self reliant india and support the make in india initiative. This will help domestic companies in general and micro, small and medium enterprise in particular. Also this creates an enormous scope for micro, small and medium enterprise of the country.

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Other measures.

An electronic market linkage is to be promoted to replace trade fairs and exhibitions as well as this will help the micro, small and medium enterprise in overcoming marketing problems in this pandemic situation.

Fintechs will be used to enhance transaction based lending using the data generated by the electronic marketplace.

The micro, small and medium enterprise receivable from the government and central public sector enterprise will be released in 45 days. This will ensure the liquidity in the hands of micro, small and medium enterprise and lead to the smooth conduct of the business.

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