In the current COVID-19 economic, medical and financial crisis, MSMEs(micro, small and medium enterprises) got a hard hit. A lack of infrastructure, ease of doing business, rigid labor laws, high financing costs were always a stumbling block for the entrepreneurs. Additionally, Chinese imports also created a burden for them in terms of tax payment, up-gradation of technology. Also, there is no smooth mechanism, as such, for inexpensive credit delivery by the national banks and it is considered one of the significant challenges.
New Delhi has set up a Government e-Marketplace(GEM) for escalation in transparency and better coordination within the field. It is also the top-notch buyer from this sector. On the other hand, Reserve Bank of India(RBI) came in support of MSME financing. It curtailed various interest rates and increased market liquidity.
India is an operating ground of around 63 million MSMEs. But the key problem here is that it has no panacea for the issues related to this sector. The government should systematize resource allocation for the needful areas as it is vital.
The COVID-19 pandemic stressed cash flows to the MSMEs. Therefore, the government has announced a Credit Guarantee Scheme(CGS) OF ₹3,00,000 crore for MSMEs. For distressed MSME, a package of ₹20,000 crores and ₹50,000 crores for equity infusion. A package of ₹75,000 crores for Non-Banking Financial Company(NBFC) will also benefit the MSMEs. By October end there are chances for the execution of CGS. If the NBFC package is extended beyond 90 days, it would prove as additional support for the sector. On a similar note, venture capital fund investment should also be given a priority so that equity capital is provided to the MSMEs.
The CGS is projected as the stabilizing factor for the MSMEs during COVID, we must also focus on replacing Chinese imports with products & services generated through the domestic Indian companies. The liberalization of land, labor, and capital laws to curtail costs is also the need of the hour for ease of doing business.