Modi government has taken many steps for the revival of MSMEs in the previous few years. The credit rules were eased up, regulatory norms have been standardized and tax incentives were offered to MSMEs. To ensure the welfare of people working in MSMEs, the government brought pension and provident fund schemes. The steps are showing up results as the credit growth has moved northwards. The total credit to MSMEs increased from 11.7 lakh crore rupees in December 2014 to 25.2 lakh crore rupees in December 2018. Therefore credit to small business increased by 115 percent in the last four years. The compound annual growth rate (CAGR) to entities was 26.1 percent while for individuals it was 15.7 percent.
The Non-Performing Assets (NPAs) of MSMEs also declined in the last few years and touched 10 percent on aggregate. However, the major decline was witnessed in the NPAs of entities while the individual’s performance was not very good. Another major finding was that MSMEs no longer go to Public Sector Banks to seek loans. The share of PSBs in total MSMEs lending declined by 19 percent while the share of private banks and NBFCs rose by 11 percent and 8 percent respectively. This shows that private players are willing to lend the MSMEs. Earlier small businesses were dependent on public sector banks and government help for loans. The lending by private players shows the confidence in the performance of private players has risen.
The number of new businesses seeking loans has moved up exponentially. Every year more than 5 lakh new credit seekers enter the market. MSMEs are the second largest employer after agriculture.
Earlier, Modi government announced Diwali bonanza to Micro, Small and Medium Enterprises (MSME) sector on Friday. The government announced many steps to support the MSME sector including faster approval of licenses, easier and cheaper credit. The MSMEs registered under GST will get 2 percent interest subsidy on new loans. The government also launched a website named psbloansin59minutes.com to provide easier and time-bound access to loans for MSMEs. “Yeh naya Bharat hai, isme bankon ke baar baar chakkar lagana khatam (This is New India, here you don’t need to go to banks again and again for loans),” said Modi while addressing MSME players from across the country.
RBI has also mended its ways with the government on the majority of issues including micro, small and medium enterprises (MSME) loans restructuring. The central bank had gone very hard on bad loans in the last few years which resulted in credit halt to MSMEs.
As per a survey conducted by ‘Confederation of Indian Industry’ (CII), the Modi government generated 1.49 crore jobs per year in the MSME sector. That’s a whopping 6 crore jobs in the last 4 years. The 2019 general election manifesto of the BJP’s has put special emphasis on Micro, Small and Medium Enterprises (MSMEs), startups and traders. The party promised to take the credit amount under the Credit Guarantee Scheme to 1 lakh crore rupees by 2024 from 19,000 crore rupees is 2017-18. The growth of the MSME sector will help the economy, job creation, and electoral prospects of BJP.