Home / Opinion / Views /  Opinion | Udyam platform & atmanirbhar - the concerns

Micro, small and medium enterprises or MSMEs have been deeply impacted by the ensuing economic crisis triggered by the Covid-19 pandemic. Many such enterprises are facing liquidity crisis, are unable to meet their payment deadlines, facing operational constraints, delayed recovery of dues from debtors and substantially weakened consumer demand. A number of them have and are still facing existential crisis.

Among the recent reforms proposed, the revised definition of MSME bears the crown. It allows the businesses to grow bigger and expand even more while still availing the benefits they enjoy with the MSME tag. These changes were expected for a long time hence their implementation was celebrated.

In the light of the economic crises being perpetrated with the nation-wide lockdown caused by the covid-19 pandemic, the working population is scrambling for jobs while the employers are haemorrhaging funds. Jobs originate with more number of job-providers. SMEs are the major job-providers in not only India but in every country on the planet. India needs jobs to be created in millions which however seductive the AI and IT may sound, cannot provide.

The government’s initiative of providing “Collateral free loans" is a nudge for the technically trained youth to start their own ventures. If each individual unit employees 10-50 persons and 1 lakh such units spring up in India, think about the number of number of jobs that it will create. It will be close to 2 to 3 million decent jobs. Such business units can enter the value chains of several domestic and export markets, the Indian economy will be on the path of reforms. 83% of the MSMEs are self-financed. They have long since avoided borrowing funds from banks which restricts their growth. Imagine the growth that could be achieved with an investment of Rs. 3000 crores.

While the government paints a rosy picture with their reforms and their expected outcomes, the reality may be quite different. Such loans will result in unhealthy debt to equity ratio in the balance sheets. Also the timeline required for relief is actually not the same as the timeline in which credit will come. There is a difference in the loans being available and the required cash actually being available in time.

Indian banks have till now preferred dealing with one large borrower than a number of small ones for the same amount.

The government’s focus has been on supporting their long term credit needs while the immediate payment deadlines are direr. There should have been more relaxations in government dues this year.

We must not forget the plight of the bigger companies who are the customers of the MSMEs. The mandate of payment within 45 days puts undue pressure on the large companies who are already facing liquidity crises. Also, there is a strong possibility of reduction in the purchasing that such large companies do from MSMEs, thereby further affecting the already weak demand in the market.

The government of India in its goal of making India “Atmanirbhar" has come up with the MSME – Udyam platform through which it has not only redefined the MSME criteria but also launched various schemes and services to aid small businesses and medium entrepreneurs. SMEs stand to avail benefits like protection against delay in payments, collateral free loans, octroi benefits, claim on stamp duty and registration charges, concession on electricity bills, subsidies, exemption on applying for government tenders, exemption in direct taxes etc.

The success of this initiative can gauged by the number of new registrations made. More than 3 lakh registrations have been noticed in July and August.

While there has been good response towards the Udyam registration portal, there are also businesses demanding government assistance in the registrations and migration from the old portal to the new one. It is reported that the new registration form is quite lengthy and complicated for some business-owners as they are not very tech-savvy.

We see a more active participation on the side of MSMEs on availing the given scheme when government takes certain steps for orientation of the online registration process and spreading awareness about the technical ease of use of the portal further.

(Neelam Rani is an associate professor in Finance and Anvita Gupta is pursuing PGP at Indian Institute of Management Shillong. The views expressed in the article are her own and do not reflect Mint's.)

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