MSME sector in India has been a critical sector of the Indian economy, but it has to undergo unprecedented level of apathy of the ruling establishment under PM Modi since 2014. What is more disheartening than the lack of latest dada on the current state of their existence? We don’t have data after the NSS 73rd round survey conducted in 2015-16 on MSMEs, and the entire Union Ministry of MSMEs go on relaying this old data year after year up to this date. The country is in dark as to what happened to MSMEs during this period.

It is on the basis of the 2015-16 data, the government goes on telling the people that MSMEs are critical for the Indian economy and its people since it contribute 30 per cent to the GDP, 45 per cent to manufacturing, 40 per cent to exports, while providing employment to 11.3 crore people.

There were about 6.33 crore MSMEs in the country in 2015-16, but as on July 26, 2023, a total of only 2.09 crore MSMEs were registered on Udyam Portal which included Udyam Assist Platform (UAP). Out of them 2.02 crore are micro, 5.6 lakh are small, and 52,821 are medium enterprises. They all together have employed 12.57 crore people.

The questions arise as to where over 4.24 crore MSMEs gone? What happened to them? How they are going with their struggle? and so on. There is no official answer to such questions, which shows the apathy of the government towards the MSMEs while it has written off 14.49 lakh crore of loans of big companies with love and even recently allowed the defaulters to renegotiate their bad loans and take new ones.

If we look at the employment figures, there was only about 1.27 crore addition in the MSME sector in the last eight years since 2015, which is a pittance compared to the 2 crore people entering every year in the Indian job market. Since the government support are available chiefly to the MSMEs on record, it can safely be argued that over 4.24 crore MSMEs are either no more extant, or have no access to government’s various measures to support the sector, such as providing collateral-free loans, credit guarantees, subsidies, tax relief, moratoriums, and incentives. Modi government had launched Atmanirbhar Bharat Abhiyan in May 2020, and now it seems that they have been left to be self-reliant without help of the government and to fend for themselves.

As per the 2015-16 data there were 6.30 crore micro, 3.31 lakh small, and 5 thousand medium enterprises in the country, but now the registered enterprises in these categories are 2.02 crore, 5.6 lakh small, and 52,821 respectively. This data reveals that about 4.28 crore micro enterprises just vanished, and not in the current registered record. However, the number of small enterprises increased by about 2.3 lakh and medium enterprises increased by over 47,800. It is clear from this record that the government policies favoured the small and medium enterprises but went against the micro enterprises.

Had the Modi government not changed the definition of micro, small and medium enterprises, it would appear uglier. By increasing the limit of investment and turnover, it increased their number. Even more big companies are brought into the fold of medium enterprises that swelled the number of medium enterprises by about 48 thousand, which became the major beneficiaries of the schemes intended for MSMEs under old definition. It means the help could not reach the MSMEs who needed them most. The changed definition also included business into enterprise categories of MSMEs only to increase their number since majority of them had already vanished by 2020.

Let us take the example of Mudra loan, which is intended to be given to micro enterprises. This Pradhan Mantri Mudra Yojna (PMMY) was launched on April 8, 2015 for providing loans up to Rs10 lakh to non-corporate, non-farm small and micro enterprises. Since its launch, only about 24 lakh crore loans were given. Loans upto Rs 50,000 was categorised as Shishu, above it up to Rs5 lakhs Kishore, and above it up to Rs10 lakh Tarun. These were announced collateral free. However, the interest rates were charged from 8.4 per cent up to 12 per cent per annum, processing fee of 0.5 per cent on Tarun laons, and GST were also charged.

Altogether, it was too costly for the poor borrower. In practice, there is much worse condition. Officials were given free hand on charging interest rates which varied according to borrowers which given rise to corruption. Borrowers were even enforced to give bank charges which they were informed that it would go to government for they have taken guarantee. This writer was approached by a borrower who was charged above Rs4300 by SBI in a state capital on a loan of Rs3 lakh in this regard, while he was told at the time of taking loan that there would be no charge. It is common knowledge that the Modi government had announced these loans on free of charges. On the other hand, millions and millions of micro enterprises have no or insufficient access to such loans.

Modi government has launched numerous programmes to help MSMEs in the country but all of them only have propaganda value, and are contributing only a little on the ground. The June 2023 Financial Stability Report of RBI says that Credit to MSME sector grew in the range of 13.8-18.9 per cetn y-o-y during 2022-23 while admitting that GNPA ratio for advances below R25 crore are particularly vulnerable to slippage. If it is so, it is a matter for serious concern. The reasons must be ascertained and the borrowers must be given expertise by the government to survive. SMA accounts went down from 11 per cent in March 2022 to 8.6 per cent in March 2023, which is additional concern.

Performance under the ECLGS scheme, which expired on March 31, 2023, have been worse. Modi government had announced Rs5 lakh crore, disbursed only Rs3.65 lakh crore from the total sanctioned amount of Rs3.73 lakh crore. RBI report says that total disbursal by Scheduled Commercial Banks was Rs2.91 lakh crore. It goes without saying that performance of the public sector banks has been very dismal. The question is what is the use of announcing big help when not actually providing them on the ground?

MSMEs need help beyond loans and must include expertise in planning, implementation, production and marketing which arenot being provided to them resulting in poor performance of the enterprises. RBI report says that an analysis of borrowers availing ECLGS indicates that one-sixth of accounts and one-twentieth of the amount disbursed turned non-performing. Stress was predominant in the micro enterprises segment, with nearly one-fifth of borrowers and a tenth of the mount disbursed turning delinquent. Overall delinquency in the microfinance segment, measured in terms of 90+ days past due, in SCB’s is still at elevated levels with a seventh of the portfolio under stress.

Under these circumstances, MSMEs need special attention, and Modi government must revisit its policies to revamp to enable them not only to survive but also thrive. (IPA Service)