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2014-03-25

Government concerned over 221 per cent rise in sick MSMEs

An inter-ministerial committee on accelerating manufacturing in the micro, small and medium enterprise (MSME) sector has made over 60 recommendations covering issues of regulation, finance, infrastructure, technology and markets that affect the different stages of the life cycle of MSMEs.

An inter-ministerial committee on accelerating manufacturing in the micro, small and medium enterprise (MSME) sector has made over 60 recommendations covering issues of regulation, finance, infrastructure, technology and markets that affect the different stages of the life cycle of MSMEs.

 

The recommendations come in the backdrop of a 221 per cent increase in the number of sick micro and small enterprises (MSEs) between 2010 and 2013 — from 77,723 to 249,903 (provisional) — after declining between 2005 and 2008. Their outstanding loans have risen by nearly 145 per cent over this period, from Rs 5,233 crore to Rs 12,800 crore.

 

The committee was set up by the cabinet secretary in the context of the long gestation period in the National Manufacturing Policy introduced by the Centre in 2011, and owing to growing concern about the performance of MSMEs in the short and medium terms.

 

The report recommends ways of boosting manufacturing in the MSME sector. It said that MSMEs individually and collectively lack the advocacy ability enjoyed by larger enterprises on economic and functional issues, and, therefore, are frequently at the receiving end of unexpected actions of other stakeholders, including the state machinery.

 

The report also says that the India Inclusive Innovation Fund must be operationalised as early as possible and the Reserve Bank of India should consider directing commercial banks to reduce lending rates to MSEs from 17-18 per cent to 13 per cent (i.e., not more than two percentage points above the base lending rate), since the credit risk is almost eliminated when the guarantee cover under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) is taken.

 

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