‘MSMEs WERE ABOUT TO DIE, OUR PACKAGE WILL ACT AS A BOOSTER DOSE'

Micro, small and medium enterprises (MSMEs) form the lifeblood of the Indian economy. With the COVID pandemic and the resultant lockdown pushing millions of India’s small businesses to the brink, the first tranche of Prime Minister Narendra Modi’s Rs 20 lakh crore package includes a slew of measures to support the sector that contributes nearly 29 per cent to the country’s GDP. Even as the government takes on a massive risk of underwriting loans worth Rs 3 lakh crore, the announcement has evoked a mixed reaction—while some economists have endorsed its ‘bang for the buck’, MSME bodies have expressed their disappointment with the failure of the measures to address their immediate concerns. Group Editorial Director (Publishing) RAJ CHENGAPPA and Deputy Editor SHWWETA PUNJ spoke to Union minister of MSME and transport NITIN GADKARI to find out if the measures are aimed at survival or revival. Excerpts from the interview:

- RAJ CHENGAPPA and SHWWETA PUNJ

Q. What’s the broader vision behind these measures? Do you think the package addresses key crisis points?

A. This will give a booster dose to MSMEs. Collateral free loans could benefit 4.5 million industries. In terms of crisis points, there was stress in the working capital of banks; there was no money for salaries or for term loan installments. The biggest problem was that industry and CPSEs (central public sector enterprises), to whom MSMEs were supplying, collectively owed them over Rs 5 lakh crore. MSMEs were about to die. This is the first time that money will be paid to MSMEs in the next 45 days. It will be a huge boost to liquidity.

Q. How will you ensure the cooperation of banks, which are risk-averse, in lending to MSMEs?

A. Banks that give loans to MSMEs don’t take the risk. If they give one lakh crore, we (the government) pay insurance premium of Rs 1,500 crore. Banks give only 25 per cent of the loan amount. We cover the rest 75 per cent. Banks don’t give loans to MSMEs on their own risk; they stand to gain from this (collateral-free credit scheme).

Earlier, only nationalised banks could give these loans, now NBFCs (non-banking financial companies), district cooperative banks, urban cooperative banks, all have been authorised to lend. Loan availability has gone up. This will benefit the industry.

Q. Does the ministry have any data on job losses and MSMEs that had to shut shop due to the lockdown?