The Micro, Small and Medium Enterprise (MSME) sector over years has emerged a key driver of India’s economy. On the sector’s potential, Union Finance Minister Nirmala Sitharaman recently said that there are over one crore registered MSMEs, employing 7.5 crore people, and generating 36% of manufacturing, which makes India well poised to be a global manufacturing hub. With their quality products, the MSMEs are accounting about 45% of the manufacturing sector output and 40% of the nation’s exports.

In his virtual address at a post-Budget seminar on MSMEs on Tuesday, PM Narendra Modi timely pointed out the transformative role that the MSMEs are playing in the economic growth of India. Cheering the sector amid slowdown concerns, the PM announced the government decision to constitute a committee to go over rules and regulations for MSMEs in the non-financial sector. He said the government would take into consideration views of the industry in turning the regulations flexible and business-friendly. Particularly, he stressed his government’s proactive role in addressing the MSME exporters’ concerns amid new EU green regulations. Indeed, none other than PM’s assurance will assuage the worries of the MSMEs, perturbed as they are by the slowdown blues in the economy, driven by decline in consumption, especially in urban areas.

During her Budget presentation, Finance Minister Sitharaman touched upon the issues of MSMEs, and informed that investment and turnover limits for the classification of MSMEs would be raised by 2.5 and 2 times respectively. The move is intended to improve overall efficiency, technological adoption, and employment generation. What it means is that small enterprises now have their limits enhanced up to Rs 25 crore, whereas for medium-sized industries, it is Rs 125 crore. Up to Rs 2.5 crore is the limit for micro enterprises as against Rs 1 crore earlier. Similarly, the turnover limit is raised up to Rs 10 crore for micro enterprises, Rs 100 crore for small ones, and Rs 500 crore for medium enterprises.

The Union Budget also proposed an enhancement of credit guarantee cover from Rs 5 crore to Rs 10 crore for micro and small enterprises, and from Rs 10 crore to Rs 20 crore for startups. This is a third-party guarantee that protects lenders from losses if a borrower defaults on a loan. A new customised credit card scheme will provide`5 lakh in credit to micro enterprises registered on the Udyam portal, with 10 lakh cards set to be issued in the first year.

The government has also announced an ambitious Fund of Funds for the sector with`10,000 crore at its disposal to expand support, especially, for startups. A scheme for 5 lakh first-time women, Scheduled Caste, and Scheduled Tribe entrepreneurs will provide term loans up to`2 crore over five years, incorporating lessons from the Stand-Up India scheme.

All this is fine, showering encomiums on the MSME sector’s contributions and potential, but what is required at the ground level is missing keen attention. A robust monitoring system at the top level is needed to earnestly, and constantly, address all the problems faced by the MSMEs, such as non-availability of timely and adequate credit. There is a high risk perception of MSMEs among the bankers and, hence, their insistence on production of collaterals which are not easily available with the managements, especially new entrepreneurs. The big industry as the top bureaucrats must heed PM’s message that today every country wants to strengthen its economic partnership with India. MSMEs have the potential to open new avenues of manufacturing and exports. A mentorship is essential for them to take advantage of this opportunity. This calls for greater ease of doing business in – as well as with – India.