Economy – MSME Sector :Problems,Demands, Significance, Schemes, Committees

Headline : MSME loans: Delay in disbursal of loans to MSMEs

Details :

In  News:

  • The union finance minister held a meeting with MSME representatives to devise plans for this critical sector.
  • The MSMEs representatives highlighted problems faced by the sector, and made certain demands for the revival of the sector.
  • She also asked industry representatives to send their response to the U K Sinha committee over the next three-four days,indicating that the recommendations would be implemented quickly.


News Summary

Problems afflicting the MSME sector:

  • Limited loan disbursal by banks even after sanctioning under 59 minutes scheme: As against loans sanctioned in just 59 minutes by PSBs through an online lending marketplace called psbloanin59minutes, only 10 per cent is being disbursed by banks.
  • Long delays in settlement of dues by the government departments and PSUs
  • Access to credit: Despite 70 per cent guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the firms have not been able to secure loans from banks in many cases.
  • The issue of VAT refunds not being transferred to GST regime by states.


  • It has undermined the MSMEs’ ability to sustain their business cycles, liquidity-starved micro, small and medium enterprises (MSMEs).

Key Demands of the MSMEs representatives:

  • Revise the turnover/investment-related definition of MSMEs upwards. The definitions, where a firm with Rs 5 crore investment is classified as ‘small’ while investment over Rs 5 crore are ‘medium’, were brought in 2006 and have since become dated due to inflation.
  • Exemption from capital gains tax for the sector if gains are reinvested in business.
  • Rationalization of penalty for late filing on Ministry of Corporate Affairs as it is same for large and small companies.


Significance of the MSME sector:

  • MSMEs are the backbone of the Indian economy, contributing nearly 45% in the manufacturing sector, 30 per cent of the GDP and 49 per cent of country’s exports. They are key engines of job creation and economic growth in developing countries.
  • MSME sector is also the second largest employer, next only to agriculture. Over 6 crore MSME units provided employment to about 11 crore people (NSSO, 2016).


12 Historic decisions by government for the MSME sector


About: PSBLoansIn59Minutes Scheme

  • Under the scheme, MSMEs registered under the Goods and Services Tax are eligible for loan up to Rs 1 crore in just 59 minutes from public sector banks (PSBs) through an online lending marketplace called ‘psbloanin59minutes’.
  • This objective of the scheme is to reduce the time and effort required to secure credit from PSBs, thus easing the life of an entrepreneur.

Need for the Scheme:

  • The difficulties in getting a loan from PSBs stem from unwillingness of the ground-level staff to even accept the loan application.
  • Even after a loan is approved, the high turnaround around time for the disbursal remains a challenge.

Scheme saw huge response:

  • The demand for such a portal is validated by both the large number of applications (around 1.31 lakh) received within two months of its launch.


  • As against loan sanctioned in 59 minutes scheme, only 10 per cent loans have disbursed by banks.

Way Forward for the 59 minutes scheme:

  • There is a need of deeper integration of the portal with banks’ processes.
  • The credit approval process should capture the existing liabilities of the borrower so that there are no disputes on quantum of credit to be sanctioned.
  • The availability of other resources such as land/technology with the borrower should also be assessed before sanctioning term loan for a new asset.
  • On the policy front, the norms for takeover of loans among lenders should be relaxed.


About: UK Sinha committee

  • RBI constituted the expert committee on MSMEs to study the problems faced by MSMEs, identify the causes, and propose long-term solutions for the economic and financial sustainability of the MSME sector.
  • This includes the review the current institutional framework in place to support the MSME sector, studying the global best practices with respect to MSMEs.

Key recommendations:

  • The creation of a distressed asset fund to assist MSMEs units in clusters.
  • The creation of a government-sponsored Fund of Funds of Rs. 10,000 crore to support venture capital and private equity firms investing in MSMEs.
  • Amendments to the Act to address the sector’s bottlenecks like access to credit and risk capital, prioritizing market facilitation and ease of doing business.
  • SIDBI should deepen credit markets for MSMEs in underserved districts and regions.
  • It suggested to fix a timeline of 7-10 days for disposal of applications..
  • It had suggested for greater adoption of technology-facilitated solutions to many of the problems encountered by the MSME sector.
Section : Economics

Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA)

What is the aim of the programme ‘PMGDISHA’?

(a) A programme for empowerment of rural destitute women by providing them source of livelihood.

(b) To make 6 Crore rural households digitally literate by March 2019.

(c) It aims to provide Digital education to the rural children in the age group of 7 14 years through select government schools and Anagnwadi.

(d) It aims to provide for financial assistance to the SC/ST non agricultural entrepreneurs from the 2500 select Gram Panchayats.

Ans : B

Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA):

One of the largest digital literacy programmes in the world.

The PMGDISHA being initiated under Digital India Programme would cover 6 crore households in rural areas to make them digitally literate by March 2019.

To ensure equitable geographical reach, each of the 250,000 Gram Panchayats would be expected to register an average of 200-300 candidates.

The implementation of the Scheme would be carried out under the overall supervision of Ministry of Electronics and IT in active collaboration with States/UTs through their designated State Implementing Agencies, District e-Governance Society (DeGS), etc.

This would empower the citizens by providing them access to information, knowledge and skills for operating computers / digital access devices.

Everything about Project Size by NIFT

  • Indian launched a project named Size India to get its own sizing standards after following the size code of European countries or the US.

News Summary

Project Size India

  • A project is to be launched to scan and measure thousands of men and women in the age group of 15-65 years to come up with an extensive size chart that reflects the “unique Indian body structure”.
  • The survey, dubbed Size India, is to be completed by 2021 and will be implemented by the National Institute of Fashion Technology (NIFT).

Sample size

  • For this NIFT will try to tap the maximum diversity of ethnicity so that the data are truly representative.
  • Basic data, including gender, locality and age, will be collated for the survey.
  • While the first phase of the survey will focus on a size chart for ages 15-65 years, the second phase will map the sizes for children, and for footwear.
  • Though data will need to be updated after 10 years, but the next survey can be done at a smaller level.


  • Whole body scanners will capture accurate 3D body maps, building a database of measurements.
  • The scan will use over 120 measurements to form the basis of the size chart that will be representative of the Indian population.
  • The methodology will ensure that ISO standards are used for this scientific study, so that the data is acceptable internationally.
  • The idea is to bring some discipline to the sizing chart, which at present is very fluid.

Support from other players

  • NIFT hopes to rope in industry players like e-commerce giants and others to participate.
  • Support could be in the form of funding for the project, mobilisation of people, to encourage people to participate in the survey, etc.


  • The size chart, besides being a help to consumers, is expected to be beneficial to the apparel industry as it will lead to a reduction of returns.

Kimberly Process Certification Scheme (KPCS)

• It is a joint Government, International Diamond Industry and Civil Society initiative to stem the flow of Conflict Diamonds (rough diamonds used to finance the conflicts and topple the established government).

• It was started in 2003 after the United Nations General Assembly adopted a landmark resolution in 2000 supporting the creation of an international certification scheme for rough diamond. It also finds mention in the United Nations Security Council resolutions.

• India is one of the founding member of KPCS. At present, KPCS has 54 members representing 81 countries including the EU with 28 members.

• KPCS enables the participating countries to certify the shipment in rough diamonds as ‘conflict-free’ and prevent entrance of conflict diamonds in legitimate trade.

• According to the KPCS terms, member states have to meet the ‘minimum requirements’ and also put in place national legislations and institutions, export, import and internal controls, commit to transparency and exchange of statistical data.

Pandit Deendayal Upadhyay Unnat Krishi Shiksha Scheme

It was launched to promote agricultural education.
Under the scheme 100 centres are opened with a fund of Rs.5.35 crore.
“Attracting and retaining youth in Agriculture (ARYA)” is a project sanctioned by the Indian Council of Agriculture (ICAR) and is being implemented at Krishi Vigyan Kendra (KVKs).
The main objective of the project was to provide complete knowledge and skill on processing, value addition and marketing of coconut and banana products through capacity building programmes involving research and development organizations.