The Micro, Small and Medium Enterprises (MSME) sector in India has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It not only plays a crucial role in providing large scale employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas and in reducing regional imbalances, assuring more equitable distribution of national income and wealth.
The MSME sector is critical for India’s economic growth. In addition to providing employment opportunities to a large population, it also promotes development and industrialization in many underdeveloped regions of India. The MSME sector has acted as a catalyst in uplifting India’s socio-economic status over all these years.
MSMEs have been adversely impacted by the COVID-19 pandemic, and this has a huge impact on the Indian economy as the MSME sector is its backbone.
The recent amendment proposed by RBI to include retail and wholesale trade under the MSME category comes as a much needed relief to many and this will help in increasing the scope and constituents of the MSME Sector, and thereby lead to the betterment of entities engaged in the wholesale and retail trade. Particularly, this change will allow such entities to benefit from Priority Sector Lending, and it will also enable them to avail loans and advances from banks and financial institutions on preferential and privileged basis.
Enterprises engaged in wholesale or retail trade will now also be able to register on Udyam Registration Portal as an MSME, and this will allow them to access and enjoy benefits of various schemes offered to the MSME sector, including those launched as part of the Atmanirbhar Bharat initiatives. Further, any enterprise having Udyog Aadhar Memorandum (which is now covered by the revised scope of MSME) can either migrate to the Udyam Registration Portal or obtain a fresh registration altogether.
Given the havoc caused to wholesale and retail traders due to the pandemic, this expansion of the ambit of MSME should help many players return to balance by restoring their businesses. It is estimated that this inclusion will benefit close to 2.5 crore retail and wholesale traders. This assistance will enable MSMEs tend to some of the most prevalent concerns such as restoring the supply chain, employing or re-employing labour that would have been laid off or retrenched owing to the financial crunch, and expansion of business thereby promoting financial and socio-economic growth. In addition to aiding existing players in the retail and wholesale trade sector, this change will also attract new participants and ultimately lead to strengthening the economy.
Per expert predictions, India may experience more COVID-19 waves and this can be a detriment to various stakeholders. However, with guaranteed financial assistance and support, new as well as existing players may look to expand and structure their businesses in a manner to survive any future turmoil or adverse impact. This may eventually help in building sustainable businesses.
In a nut shell, the subject amendment is a welcome change that will benefit many and, particularly help smaller players in the market. This structured revival of the MSME sector may lead to an increased demand for goods and services and expedite the process of economic revival.
This article was originally published in The Times of India on 30 September 2021 Written by: Arvind Sharma, Partner. Click here for original article
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