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How the plan will help the MSME sector. Who are the beneficiaries? How it will impact the manufacturing sector growth and GDP. Is the effect immediate? Will, there be any misuse of funds and leakages, etc.
On November 2nd Prime Minister Narendra Modi announced a loan sanction of up to a crore for MSMEs. This has definitely been received as a progressive move toward the betterment of the MSME sector. The scheme also includes or mandates the companies to use up to 25% of total purchase instead of 20% with 3% reserved for women entrepreneurs, the interest rate that is being charged is 8%. The loan can be applied on the online portal and would be approved within 59 minutes after which the process takes up to 7-8 working days to get disbursed.
By providing GST details, Income Tax details, Bank account details an entrepreneur can avail of the loan. The GST registered firms shall also get a rebate of 2% on the interest paid on the loan. Based on the eligibility, there has been no specific information provided however it would limit to MSMEs. 6,000 crore has been set aside toward the enhancement of technology which would ease and enhance the manufacturing sector. The main criteria, however, is to boost the growth of the manufacturing sector and to increase GDP as MSME plays a major role in the contribution towards GDP by contributing up to 30%, there have been five aspects that are focused on. “Access to credit, access to market, technology up-gradation, ease of doing business, and a sense of security for employees”.
Regarding the effect is immediate, which can be learnt through user feedback. The feedback however has not been very positive as the users have started to complain about the delay in receiving OTPs, or about the catch of just “sanction” of the loan. This does not talk about the disbursement which would leave the banks to decide to gather additional processes of documentation hence the loan as per the scheme is either being approved or sanctioned but not disbursed. Because the banks do have the authority to seek further documentation again, there could be a delay in the disbursement of funds. However, the effect can only be learned by the more usage of this scheme, which the government might seek to better it. The process is said to be user – friendly which would enable most of the MSMEs to get their hands on it.
As the disbursement has not been successful yet, news about the misuse and leakages has not yet been brought to light. However, as the government has not been specific about the failure in the recovery of the loan, the chance of the banks being at a loss is highly likely. The scheme is receiving criticism for being unclear or the information being vague regarding the disbursement, recovery, or even the eligibility of the loans. Also, the fact that the applicant is expected to pay a convenience fee has been also thrown under the negative shadow. Regardless of the criticism, the fee being a small amount of Rs. 1,000 does enable almost all of the MSME to be able to bear the cost. As the scheme is still new, it would be difficult to judge its effectiveness yet, but it has at least opened doors for widening their business and enhancing technology for MSMEs and Women Entrepreneurs.
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