The pandemic induced various challenges such as reduced growth figures in the country. According to the National Statistics Office (NSO), the Gross Domestic Product (GDP) at constant prices in Quarter 1 (Q1) (April -June) for the Financial Year (FY) 2020-21 showed a contraction of 23.9% as compared to the figures for the previous financial year. Similarly, GDP at current prices showed a contraction of 22.6%. This was primarily because of the lockdowns and the subsequent halt in economic activities. The figures, however, improved in Quarter 2 (July-September). The GDP at constant prices contracted by 7.5% for Q2 of the FY 2020-21 as compared to the 4.4% growth for Q2 of the previous FY, while the GDP at current prices showed a contraction of 4.0% as compared to the 5.9% growth in Q2 of the previous FY.
Growth figures and the MSME sector
The growth figures in the country are contingent upon the performance of various industries, including the Micro, Small and Medium Enterprises (MSMEs). After agriculture and construction, it is the largest employer in the country, with more than 111 million workers. The MSME sector comprises manufacturing and services. Various enterprises ranging from single-person enterprises to those with more than five workers are included in this sector. According to an NSO survey in 2015-16, around 94% of the MSME enterprises have less than four workers, while single-person enterprises account for around 62%. Interestingly, only 31% of MSME enterprises are registered under various acts. This is because of several hurdles being faced by the sector, the NSO survey said. According to industry experts, the economic recovery of the country is directly related to the performance of the Home-Based Business.
Problems faced by the MSME sector
Here’s a look at the problems faced by this sector:
- Lack of demand: As per the 2015-16 survey, the MSME sector faced problems in the absence of robust demand in the market.
- Unpaid dues: The survey also underlined that various unpaid dues, including those by the government, aggravated the problems faced by this sector.
- Demonetisation: The union government’s measure of demonetisation negatively impacted this sector by resulting in a liquidity crunch.
- Regulatory hurdles: This sector faces the biggest hurdle in complying with the new GST regime.
- The adverse impact of the pandemic: Like other key sectors, the MSME sector was also adversely impacted by the pandemic. By October 2020, the number of MSME establishments registered with the Employees Provident Fund Organisation (EPFO) declined by over 30,800. In the same period, the number of unemployed workers in this sector stood at 1.8 million.
Despite the challenges faced by the sector, it has shown considerable resilience. If you too are a self-employed individual in the MSME sector and face challenges, you can opt for an online business loan on Finserv MARKETS. At affordable business loan interest rates, you can enhance the functioning of your enterprise. As a woman entrepreneur, you can avail hassle-free business loans for women.
Measures taken by the government to revive the MSME sector
The government took several measures to revive this sector. These included:
- Fiscal stimulus to boost employment: On November 12, 2020, the union government announced a fiscal stimulus to boost employment in the MSME sector. As part of the initiative, under the Atmanirbhar Bharat Yojana, the government would bear the entire provident fund contributions for all new employees. The government would bear the costs for up to two years.
- Liquidity measures: In May 2020, the government announced a range of liquidity measures to provide relief to the MSME sector. This included collateral-free automatic loans to the tune of Rs. 3 Lakh Crore. The eligibility conditions included borrowers with up to Rs. 25 Crore outstanding and having a turnover of Rs.100 Crore. The government also announced that it would take steps to provide Rs. 20,000 Crore as subordinate debt along with Rs. 50,000 Crore equity infusion for MSMEs.
These measures were taken to accelerate the growth of MSMEs. In addition to being a part of the MSME growth process by availing the measures taken by the government, you can also take an online business loan, available on Finserv MARKETS to manage a steady cash flow, purchase machinery or pay your short-term debt. To meet the unique fund requirements of women entrepreneurs, you can receive convenient business loans for women. The competitive business loan interest rate is a key component of the business loans on Finserv MARKETS.
Further steps required to boost the MSME sector
According to industry experts, the MSME sector also requires to be prioritised by the government. Easing the regulatory burden along with providing a level playing field as compared to large companies would further boost the growth of this sector.
Thus, the MSME sector plays a critical role in the India economy and it can be safely said that the sector holds the key to economic recovery. Now you can also be a part of the economic recovery by expanding your Small and Medium Business Enterprise (SME) to its fullest potential. An online business loan, available on Finserv MARKETS, can help you meet a range of business needs and requirements. This MSME business loan including business loans for women come with a wide slew of benefits, like attractive business loan interest rate, easy application, quick disbursal and flexible repayment tenures.