IDBI bank offers MSME Loan banking solutions, IDBI bank believes that the Micro, Small and Medium Enterprises will drive future growth in India and Abroad.
Tuesday, 28 June 2016
Tuesday, 14 June 2016
The previous year was an exciting one for the MSME sector as well as the Indian economy as a whole. The election of a government with absolute majority, a first in more than 25 years, raised hopes that economic decision-making will be freed from the shackles of political compulsions.
The MSME sector responded to the growing pace of the global economy, including India’s own economy, by continuing to grow at a rate in excess of 10% throughout the year. This has been the trend over the past few years and the previous year was not an exception to this rule.
As of 2014, the MSME Loan sector contributes around 8% to the national GDP and provides around 45% of the total manufacturing output of the country. 40% of India’s exports are produced by MSMEs while the 36 million MSMEs in India provide employment to more than 80 million members of the Indian labor pool. Recognizing the important role played by the MSME sector, the previous year saw numerous new policies designed to simplify SME lending practices along with easier small business funding of working capital requirements.
Make in India Campaign
This campaign has a direct impact on the MSME sector, considering the lion’s share of this sector in India’s manufacturing output. This policy marks a shift towards making India a global manufacturing hub as opposed to mere services hub.
While the growth of the services sector occurred due to favorable global economic conditions and the presence of an educated workforce, policy makers have realized that the Indian economy cannot grow if the manufacturing sector continues to be ignored. This policy presents an exciting opportunity for the MSME sector in India.
Contrary to popular perception, skill development, especially in the MSME sector, has been an important area of focus for the past many years now. However, the combination of Make in India and Skill India Mission has resulted in increased focus on rapid and effective development of skills of India’s workforce.
Around 5.5 lakh individuals have received skill training under the various schemes and programs initiated by Tool Rooms, it is, MSME Development Institutes and other government. This figure is expected to rise further now that the government is recognizing the importance of providing financial support to individuals during as well as after the training process is completed.
Lack of adequate credit facilities has always been the bane of the Indian MSME sector. To tackle this problem, the Union Budget 2015 announced allocation of a sum of Rs. 20,000 crore to the newly-established credit refinance agency focusing solely on micro units in India.
This agency, MUDRA, is expected to bolster the effectiveness of the Credit Guarantee Fund Scheme, which enables small enterprises obtain loans of up to Rs. 1 crore without the onerous requirements of guarantors or collateral security. As of November 2014, the Credit Guarantee Fund Scheme had provided guarantee for loans worth Rs. 84,000 crores spread over close to 16.9 lakh proposals from MSMEs.
On the whole, the combination of political stability and economic growth is expected to help the MSME sector grow faster in 2015. While the effects of the numerous new policies introduced by the government may not be visible immediately, there is growing belief that the next few years can prove to be very beneficial for the MSME sector in India.