NEW DELHI: Extending a lifeline to India’s struggling micro, small and medium enterprises (MSMEs), which are badly hit by the nationwide lockdown due to the Covid-19 pandemic, the Union Cabinet on Monday approved tweaking the definition of MSMEs in such a way that more companies can claim the benefits available for small businesses.
The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, also approved provisioning of Rs 20,000 crore as subordinated debt (unsecured loan) to provide equity support to stressed MSMEs.
In other decisions, the Cabinet also cleared equity infusion of Rs 50,000 crore for small scale units through a Fund of Funds, which will help MSMEs to be listed and be able to raise funds from the market.According to the new definitions, MSMEs with an investment of Rs 1 crore and turnover of Rs 5 crore will be classified as micro-units, units with an investment of Rs 10 crore and turnover of Rs 50 crore as small units and those with investment of Rs 50 crore and turnover of up to Rs 250 crore as medium units.
The policy change was already announced by Finance Minister Nirmala Sitharaman last month as part of Aatmnirbhar Bharat package. While the FM had proposed definition for medium enterprises as companies with investment up to Rs 20 crore and turnover of Rs 100 crore, companies requested her to enhance it further, which has now been accepted.
“This will help in attracting investments and creating more jobs in the MSME sector,” an official statement said.Nitin Gadkari, Union minister for MSMEs, said the sector is very critical for the economy and 60 million MSMEs contribute as much as 29% to India’s GDP, 48% of total exports, and generate 110 million jobs.
Exporters welcomed the move saying the change in definition will not only help in ease of doing business, but also attract more investment.
“Excluding exports turnover from total turnover will help in internationalisation of MSME and will bring their focus on exports. This will also benefit a lot of gems and jewellery companies, which would have breached the MSME criteria due to the sheer cost of their inputs,” said Sharad Kumar Saraf, president, Federation of Indian Export Organisations.
Loans for vendors
The Cabinet also cleared Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi, under which street vendors can avail working capital loan of Rs 10,000 each, repayable over one year
