MSMEs contribute nearly 29% of the country’s total GDP, around one-third of the total manufacturing output and around 40% of the total exports. They are described as the growth engines of the Indian economy employ roughly 11 crore people. This is why the Modi government paid special attention to this sector and managed to save a whopping 1.5 crore jobs.
A report by the State Bank of India has revealed some exciting data. The Emergency Credit Line Guarantee Scheme (ECLGS) has helped save around 13.5 lakh units and 1.5 crore jobs in the MSME sector.
How the Modi government managed to save MSMEs and 1.5 crore jobs
The Credit Guarantee Scheme has helped the Modi government save MSME loan accounts worth Rs. 1.8 lakh crore from slipping into NPA.
S K Ghosh, SBI’s group chief economic advisor said, “This means that around 14% of the outstanding MSME credit (including 2% of restructured) has been saved from slipping into NPA because of the ECLG scheme.”
The SBI report stated, “As per our analysis, if these units had turned non-performing, then 1.5 crore workers would have become unemployed. In effect, the ECLGS saved the livelihood for 6 crore families (assuming four family members per worker including herself).”
Micro and small category borrowers biggest beneficiaries
Of the 13.5 lakh MSME accounts that have been saved, almost 93.7% are in the micro and small category. So, the most vulnerable enterprises have been the major beneficiaries of the scheme.
The remaining six percent of the beneficiaries are medium enterprises, as per SBI Research.
What is ECLGS
The ECLGS was launched by the Modi government in May 2020, shortly after a national lockdown was imposed in the country due to the COVID-19 Pandemic. Till now, the scheme has been extended four times to cover various industries.
The scheme provides up to 20% of the borrower’s total outstanding credit and up to Rs. 25 crores is guaranteed by the government.
The scheme played a central role in the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package announced in May 2020 by Union Finance Minister Nirmala Sitharaman to alleviate the distress caused by the national lockdown.
A corpus of Rs 41,600 crore was set up by the Modi government, spread over the current year and the next three financial years.
Success in saving MSMEs puts India ahead of China
While India has saved several MSMEs in the Pandemic era, its neighbour China has failed to save millions of small-scale firms.
In fact, 4.37 million of China’s small businesses permanently shut shop in the first 11 months of 2021. By comparison, less than 1.5 million new firms opened at the same time.
It was the first time in two decades, that the number of micro and small firms shutting shop has exceeded the number of such firms registering themselves.
Much like India, the Chinese industry is also dominated by its small-scale firms that employ millions of people across the country. However, China has failed to save them during the Pandemic.
On the other hand, India has managed to keep its MSME sector alive despite the distress caused by the Pandemic. India’s success in managing its economy and manufacturing sector during the Pandemic places it ahead of China. And now, India can reap the dividends of its success in saving millions of enterprises and jobs.