MSMEs Schemes: What are The Hits and Misses, explains R Gopinath Rao, IEDS

Dr Venkatesh of chats with R Gopinath Rao, IEDS, the Deputy Director of the MSME Development Institute in Bengaluru, about the government's schemes and which ones have been successful, as well as the implementation process, to better understand the effects on the ground.

In India, 63 million Micro, Small, and Medium Enterprises (MSMEs) employ around 11 crore people. However, they were among the hardest hit by the initial and second wave of the Covid-19 pandemic, which harmed their access to markets, credit, and financial stability.

In response, the Indian government announced a slew of programmes aimed at bolstering the country’s financial and economic health. Dr Venkatesh of spoke to R Gopinath Rao, IEDS, the Deputy Director of the MSME Development Institute in Bengaluru, about the government’s schemes and which ones have been successful, as well as the implementation process, to better understand the effects on the ground. Edited Excerpts:

Q. From March 2020 till now, how has been the response of MSMEs to Covid-19 pandemic?

During the epidemic, all industries had unexpected operational difficulties. GDP growth was negative last year. However, India’s industry and businesses are presently growing. The first quarter GDP is nearly 38000 crores, indicating that the post-covid development path has already begun and is a good indicator. The forex reserve’s inputs have increased. Because we are perceived as positive and trustworthy, we have a pro-people policy, Government is proactive, India is doing better business than many other countries. A notable example of this is setting up by manufacturing unit by Tesla in India.

Q. Any specific schemes that have been hit among MSMEs?

Apart from the standard MSME programmes, the government has developed packages that have been beneficial to the sector, such as the Emergency Credit Lines, through which Rs 4.5 lakh crores was disbursed with a time limit extension. Other MSME programmes, like Prime Minister Employment Generation Programme (PMEGP), Mudra Scheme, and Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), are being implemented in accordance with RBI standards

Q. What are some of the schemes that have not worked out for MSMEs?

Because many first-generation entrepreneurs were unwilling to take risks, the PMEGP concept was not implemented the way it has to be. Despite the fact that the Khadi & Village Industries Commission (KVIC) began a number of online sessions to promote the concept, it has not taken off as expected. It is, however, a continual process that will be put to better use in the future.

Q. What makes schemes for SMEs and MSMEs successful?

Marketing, financial schemes, and cluster development programmes are all important, as are marketing, financial schemes, and cluster development programmes (MSE-CDP), GEM portal has been implemented, requiring all semi-government, central government, ministry, and public-sector entities to acquire their commodities through this portal, which will benefit the sector. We want their businesses to run smoothly and sustainably, thus registering with the GEM site is essential. To prevent delayed payments, the TReDS programme, is also accessible.

We are also attempting to foster incubation, whereby entrepreneurs with strong ideas can be commercialised with the assistance of technical institutions, which grant Rs. 1 crore to either students or MSME’s. We have partnered with the Indian Institute of Science (IISC) to assist us in identifying and disbursing funds to creative individuals and hence are taking care of the designing part too.

Generally, why is a tepid response seen for schemes related to MSMEs?

During the fiscal year 20-21, the government procured items worth 1,50,000 crores, with 40,000 crores coming from MSMEs. Schemes help to keep the industry afloat. The response is not insignificant. It isn’t accurate. It takes time to transition from traditional to digital. It has not yet reached the grassroots level, where we are focusing on conducting seminars to reach as many MSME owners as possible. People have migrated in Udhyam online registration, for example. In 2-3 years, we expect this to pick up, with MSMEs becoming fully digitised.

From a policy perspective, what’s the best way to make schemes successful? Implementation at ground level or via intermediaries? (Banks, etc.)

Bankers are doing an excellent job; they have targets in various schemes introduced such as Mudra projects and Stand-up India. Every quarter, the RBI convenes an MSME empowerment committee meeting, at which data such as the number of loans issued and the reasons for non-approval is given.

MSMES should take advantage of MSME Schemes and initiatives and innovate in the new normal, according to Gopinath, who also suggested that they adapt their business procedures and opt for digitization. People should only register for Udyam through the official government portal and should avoid using intermediaries.