IFMR Digest Sep 2017

E X P E R T I N S I G H T
F R O M
I F M R L E A D
B y A n k u r G a u t a m a n d M r i d u l y a N a r a s i m h a n
Researchers at the MSME and
Entrepreneurship vertical at IFMR LEAD
INTERNATIONAL MSME
DAY: WHAT THE INDIAN
POLICY LANDSCAPE
HOLDS FOR THE MSME
SECTOR
In a recent resolution of the UN General
Assembly, June 27 was adopted as the
International MSME Day in recognition of the
role of Micro-, Small- and Medium enterprises
(MSMEs) in achieving the Sustainable
Development Goals (SDGs) and their
contribution to the growth of economies
worldwide – especially in the context of
developing countries. In India, with over 51
million units, MSMEs account for more than
80 per cent of the total number of industrial
enterprises and produce over 8000 value-
added products. These outputs account for 45
per cent of the total manufacturing output
and 40 per cent of the exports from India.
Moreover, the MSME sector provides
employment to over 117 million people in the
country. Increasingly, the Government of
India has acknowledged that MSMEs drive
the growth of the Indian economy and this
acknowledgement has come in the form of
policies directed towards achieving their full
potential. Policy and regulations are crucial in
determining the nature and direction of any
economic activity, therefore, as the world
observes the International MSME day, we
look at some of the recent policies and
14
campaigns of the central government and how
they impact the MSME sector in India.
MAKE IN INDIA
The ambitious ‘Make in India’ campaign is the
government of India’s flagship mission to boost
manufacturing output which certainly does not
ignore the sector. The campaign came with a range
of policy initiatives and investments to tackle the
challenges MSMEs face. The Make in India Soft
Loan Fund launched by Small Industries
Development Bank of India (SIBDI in 2015 offers
loans in the nature of quasi-equity and term loans
on softer terms to meet the required debt-equity
ratio for the establishment and growth of
MSMEs.The government’s Scheme of Fund for
Regeneration of Traditional Industries (SFURTI)
scheme that was launched in 2005 focuses on the
cluster approach, organising traditional industries
and artisans.These individuals are supported
to enhance marketability of their products with
design interventions, improved packaging and
infrastructure under this scheme. 800 clusters were
proposed in the Twelfth Five Year Plan after 71
clusters were developed in the first phase with an
outlay of Rs 149.44 crores The National
Manufacturing Policy has eased regulatory norms
as well. Among the special benefits to SMEs, the
notable ones include a tax pass-through status for
venture capital funds with a focus on SMEs in the
manufacturing sector, liberalization of Reserve
Bank of India (RBI) and Insurance Regulatory and
Development Authority IRDA guidelines for
investments by banks and insurance companies in
SMEs.