All India Radio (AIR) IAS UPSC – Outreach and Support to MSME Sector

  • IASbaba
  • January 3, 2019
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All India Radio
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Outreach and Support to MSME Sector

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Search 2nd November, 2018 Spotlight here: http://www.newsonair.com/Audio-Archive-Search.aspx

General Studies 2:

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3:

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
  • Inclusive growth and issues arising from it.
  • Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Credit stimulus package for micro, small, and medium enterprises (MSMEs)

Why: In response to twin shocks arising from demonetization and GST

  • Demonetisation made it difficult for these units to pay their contractual labour in cash and access credit, which is again largely through informal channels.
  • GST similarly led to an increase in compliance costs, apart from depriving them of the inherent advantages of doing business in cash without leaving a paper trail.
  • The outstanding gross bank credit to MSMEs has shrunk — from Rs 4.71 lakh crore to Rs 4.69 crore between September 2014 and September 2018.
  • Despite refinancing schemes such as Pradhan Mantri Mudra Yojana, this shrunk is proof of formal lending institutions being unable to fill the void either.

Credit Stimulus is the policy which seeks to enhance credit flow to various critical sectors in the economy by providing loans at the cheaper rate of interest. The main idea behind the credit stimulus is to promote growth and development of the critical sectors and to reduce their dependence on informal borrowings.

Five key aspects for facilitating the MSME sector:

  • Access to credit
  • Access to market
  • Technology upgradation
  • Ease of doing business
  • A sense of security for employees

12 key initiatives which will help the growth, expansion and facilitation of MSMEs across the country were unveiledunder the 5 key aspects mentioned above –

Access to credit:

  • 59-minute loan portal to enable easy access to credit for MSMEs
  • 2 percent interest subvention for all GST registered MSMEs, on fresh or incremental loans
  • All companies with a turnover more than Rs. 500 crore, must now compulsorily be brought on the Trade Receivables e-Discounting System (TReDS) – will enable entrepreneurs to access credit from banks, based ontheir upcoming receivables. This will resolve their problems of cash cycle.

Access to market:

  • Public sector companies have now been asked to compulsorily procure 25 percent, instead of 20 percent of their total purchases, from MSMEs.
  • Out of the 25 percent procurement mandated from MSMEs, 3 percent must now be reserved for women entrepreneurs.
  • All public sector undertakings of the Union Government must now compulsorily be a part of GeM

Technology upgradation: 20 hubs will be formed across the country, and 100 spokes in the form of tool rooms will be established.

Ease of doing business:

  • Clusters will be formed of pharma MSMEs – 70 percent cost of establishing these clusters will be borne by the Union Government
  • The return under 8 labour laws and 10 Union regulations must now be filed only once a year.
  • The establishments to be visited by an Inspector will be decided through a computerised random allotment.
  • Under air pollution and water pollution laws, now both these have been merged as a single consent and the return will be accepted through self-certification.
  • An Ordinance has been brought, under which, for minor violations under the Companies Act, the entrepreneur will no longer have to approach the Courts, but can correct them through simple procedures.

A sense of security for employees: a mission will be launched to ensure that they have Jan Dhan Accounts, provident fund and insurance.

Must Read: Mindmap 1 + Mindmap 2 + Mindmap 3 + Growth in Manufacturing Sector

Connecting the Dots:

  1. Analyse the challenges that make Indian manufacturing less competitive globally? How can India ensure a greater share in global GDP from manufacturing?
  2. Do you think the micro, small and medium industries hold the key to India’s industrial growth? Examine.
  3. What is Zero Defect – Zero Effect (ZED) scheme? Examine its significance for India’s MSME sector.

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