For, the sector had been termed as the ‘cradle’ of Prime Minister Narendra Modi’s Make in India mission. When the year 2016 began, the MSME sector was on a high.
MSME Minister Kalraj Mishra did not spare any opportunity to open portals and list out the number of schemes to boost the sector, such as MUDRA and Stand Up India.
Simple registration
One of the biggest achievements of his Ministry, he said, was a portal on Udyog Aadhaar Memorandum, which was launched in September 2015, to make registration of units much simpler.
“About 8 lakh registrations have been done, while registration during the 67 years of Independence was only around 22 lakh,” the Ministry said, while listing its two-year achievements this year.
The Ministry also noted the record production and sale of Khadi and exports of coir, which it said had surpassed Rs. 1,900 crore during 2015-16, as against Rs. 1,400 crore during 2013-14, at a time when overall exports had been plunging due to global headwinds.
Big blow
But, as 2017 nears, this largely cash-dependent sector has been dealt another body blow by the demonetisation of Rs. 500 and Rs. 1,000 currency notes announced on November 8.
The sector’s order books, output and sales have plunged. The grim picture for the sector has been clearly spelt out by State Bank of India chief Arundhati Bhattacharya. Speaking on the impact of note ban on the economy in a recent interview to a news wire, she said: “I think that the SME sector will need some hand holding because they don’t really have any staying power, they don’t have deep pockets. They make a day-to-day living and their margins are compressed in any case.”
The MSME sector, which has about 40 million registered units employing about a 100 million people, directly and indirectly, is the largest job provider in the country.
It contributes to 8 per cent to the GDP and has a share of 45 per cent in the country’s manufacturing output and 40 per cent in the total exports.
Budget promises
Budget 2016-17 had focussed on job generation, skill development and ‘ease of doing business’ and had also given incentives to the sector by increasing the turnover limit under presumptive taxation scheme to Rs. 2 crore.
The allocation for MUDRA Yojana was also hiked to Rs. 1,80,000 crore, among other things. For, in 2016-17, the government’s target was to set up 55,200 enterprises, providing job opportunities to 4,41,600 youth.
Bleak outlook
But, post-demonetisaton, the sector’s outlook looks bleak. Leave aside creating new jobs, there are reports of the labour force moving back to villages as small and micro enterprises are finding it increasingly difficult to pay wages or get new orders, be it the lock makers of Aligarh, the brass industry in Moradabad, steel utensil makers, rubber goods, garments, textiles, jewellery, leather units, chemicals and so on.
To add to this, the number of sick MSMEs has risen to 4,86,291 in 2016, which owe Rs. 40,642.50 crore to banks as outstandings, according to Reserve Bank of India figures.
This is much higher than the total number of 4,73,823 sick MSMEs till March 2015 and 4,68,399 in March 2014, and almost double that of 2,22,204 in March 2013.
With a national MSME policy yet to be finalised, the sector that was anyway facing a credit squeeze, is now struggling with an almost 50 per cent slow down in production, with hundreds of enterprises cutting down on shifts.
As another year dawns, the sector, which forms the backbone of the country’s economy, yet again awaits some hand-holding from the government and lending agencies, lest it is battered by a more serious financial crisis, followed by labour unrest.
Achievements in 2016
- Cabinet nod for ‘Indian Enterprise Development Service’ under the Ministry
- National SC/ST hub launched in Ludhiana
- MSME Databank and Finance Facilitation portals launched
- 38 PSUs achieved target of 20 per cent public procurement from MSMEs
- Stone laid for MSME Technology Centre at Greater Noida
- Khadi certification made online, PayTm proposal to launch KVI products online free of cost for first three months approved
Source: Business Line