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Initial Observations on the announcements for MSME Sector as part of ATMANIRBHAR BHARAT ABHIYAN: Dr. VisswasMujtaba AhmedFollow3 min read·May 18, 2020 --
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The importance of MSME as an economic driver is undisputable. The recent announcement made by the Hon’ble Finance Minister as part of the “Atmanirbhar Bharat Abhiyan” introduced by Our Prime
Minister specifically with regard to the MSME Sector appears to be very deceptive and elusive. If you study the present package the Government is more concerned and bothered about the
banking health rather than focusing on strengthening MSME. The background of this package is that MSME is next to the agriculture sector who can stimulate economic growth. It is also
accepted that presently this sector is under stress and with the outbreak of COVID 19 survival of lakhs of units is the question mark? The objective of this package should have been
two-fold: Protecting MSMEs from this vulnerable condition ie. Protection from NPA. Strengthening their economic feasibility thereby adding to GDP, creating and sustaining employment thereby
increasing the purchasing power of the common man. The present package has not dealt with the NPA issue at all. The need of the hour was to provide holiday period for declaring fresh NPA’s
and providing immunity to the deserving existing NPA’s. As far as strengthening the MSMEs is concerned, providing additional loans is not a solution but it is a killing dose. Providing loans
without having a proper capital structure of the MSME will increase the interest cost and the MSME entrepreneurs will become unpaid slaves of the lenders. As the revival and growth of MSMEs
largely depend upon its capital structuring (1) the debt-equity ratio of the MSMEs should be balanced. (2) the rate of interest should be drastically reduced in order to achieve its
Break-even point, become healthy, gain profitability, and ultimately regularize the Bank Loan. (3) Moreover, if the long-term working capital is provided to the MSMEs backed by equity it
will definitely ensure its revival. The entire package is designed with a lack of vision to boost the economic feasibility possibilities of MSMEs. The efforts and measures exhibited by way
of this package for the MSME Sector are half-hearted. Has the Government anticipated the burden on the MSME Sector after a period of one or two years and Is there any evaluation conducted by
an expert core group of an economist to understand the repercussions? It appears that such a short-sighted approach will provide them much needed cash flow but hamper their existence in the
long run. The establishment of stressed MSME Fund is the welcome move in line with my earlier recommendations. However, it is Rs.20,000 Crores sufficient for their resolution and revival
considering the size of NPA as known and hidden in the banking system? To actually revive and restore the MSME, the Government of India should provide them with long term working capital
with a reduced rate of interest. There should be an infusion of equity/quasi-equity along with the exit route of SME Listing/ Buyback arrangements or further placements etc. The Governm
ent further needs to clarify the announcement with regard to eligibility, sanction and disbursal procedure, the definition of capped interest rate, and so on in the present package. For a
deserving business, banking is not the only source to meet your capital requirements. Capital is nothing but discounting of future profit whether owned capital or borrowed capital. If you
are a Businessman and need any advice and assistance in running, resolution, revival, and restructuring your business, you may feel free to contact us. You may also kindly go through our
website www.npaconsultant.in for a better understanding. The actual mantra for ATMANIRBHAR BHARAT is SAVE SMEs, SAVE INDIA