Small Scale, Mega Mess

The government needs to take steps beyond the relief package for the revival of the pandemic-battered MSME sector

- Lola Nayar

The government’s top priority is to clean up the mess MSMEs (micro, small, and medium enterprises) are in due to the pandemic. All efforts are on to provide them credit guarantees and an edge where public sector purchases are concerned. Redefinition of MSMEs on the basis of turnover, number of employees and asset criteria are all good steps, though, in the case of medium-scale units, critics say the reforms are veiled protectionism. This is not without basis—hopefully, it will not tempt companies to remain in the medium category to avail the benefits from the policy measures over the past few years instead of expanding.

Professor Vikas Srivastava of IIM Lucknow feels the government’s move is in line with the current global norms. These steps should help this vital segment of manufacturing and services activities in the country avail bank credit more easily, he feels. “It is good that the government is moving to a globally acceptable MSME definition on the basis of turnover,” says Srivastava, pointing out that among the various criteria adopted by banks to provide working capital investment, turnover is seen as the most reliable. Traditionally, banks and other financial institutions do not put much faith in MSME data.