The 6.3 Crore family of Micro, Small, and Medium Enterprises (MSMEs), which forms the bedrock of the Indian economy by contributing 30 percent in GDP and employing 11 crore people, is severely impacted in the second wave of the pandemic. In the first wave itself, MSMEs grappled with getting access to markets, credits, financial security, and depleting cash reserves. According to a survey from LocalCircles that involved 6000 start-ups and MSMEs from 172 districts, it was found that 59 percent of the start-ups and MSMEs are expected to scale down or sell or shut down their operations within 6 months. 41 percent of the start-ups were falling short of funds to survive.This has attracted the attention of World Bank to pump in $500 million under the programme Raising and Accelerating Micro, Small and Medium Enterprise Performance (RAMP) to the Covid affected MSMEs in India to fulfill their liquidity and credit needs.
According to a survey from LocalCircles that involved 6000 start-ups and MSMEs from 172 districts, it was found that 59 percent of the start-ups and MSMEs are expected to scale down or sell or shut down their operations within 6 months.
What is RAMP’s objective?
The RAMP programme targets to revitalise India’s 5.55 lakh MSMEs and plans to mobilise financing of $15.5 billion as part of the government’s $3.4 billion MSME Competitiveness – A post-Covid Resilience and Recovery Programme (MCRRP). This programme will aid the government’s efforts to revive MSME businesses while enhancing productivity and generating employment.
The World Bank has earlier extended financial help to Indian MSMEs worth $750 million under its MSME Emergency Response Program in July 2020, from which 5 million MSMEs have sought benefits. The $500 million loan from the International Bank for Reconstruction and Development (IBRD), holds a maturity period of 18.5 years and includes a 5.5-year grace period.
How will this programme help MSMEs?
The Indian MSME sector is troubled with getting access to formal sources of financial and non-financial services. More than 40 percent of the MSMEs lack access to formal sources of finance. The RAMP programme will help MSMEs to gain access to finance and the working capital by bolstering the receivable financial markets and will scale up the online dispute resolution mechanisms to address the issue of delayed payments. The pumping of funds will prime the businesses for normal functioning and help to wade from the long-standing financial sector issues that have been hindering the growth of MSMEs since the onset of covid.
What is there for the MSMEs?
To provide relief to the strained MSME sector, the government has introduced a slew of initiatives such as deduction in TDS rates by 25 percent, reduced rate of interest on delayed payment of taxes, etc. The monetary support from the World Bank will suffice the credit needs. Credit is fuel for the MSME engine to survive. Many MSMEs find it cumbersome to get loans from traditional banks and financial institutions. Such initiatives will help the MSMEs to sustain continuity of business in the grim times of the pandemic.