SYMBIOSIS COLLEGE OF ARTS

& COMMERCE
An Autonomous College | Under Savitribai Phule Pune
University

Literature Review
On
ATMANIRBHAR BHARAT ABHIYAN AND MSMEs:

An Introspection with reference to the Financial aids

This assignment is submitted for the partial fulfilment of Internal Assessment for the course
subject titled Industrial Economics (Course Code: 17C90241), Semester III, Academic Year
2020-21.

Submitted to:
Ms Shrabana Mukherjee, Visiting Faculty, Department of Commerce

Submitted by:
Diya Susan Biju 8204 section A

Aparna S Kumar 8207 section A

Mariya Joy 8209 section A

Maji M 8211 section A

Liya Anu Varghese 8214 section A

Kaustubh Ashok Shinde 8337 section B

Date of Submission: 15th November, 2020

To whom it may concern,

Diya Susan Biju Aparna S Kumar

Mariya Joy Maji M

Liya Anu Varghese Kaustubh Ashok Shinde

Date of Submission: 15th November, 2020

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 ATMANIRBHAR BHARAT ABHIYAN AND MSMEs: An Introspection
with reference to the Financial aids

“SMALL BUSINESS,

BIG HEART”- T.J Mousetis

The Medium Small and Micro Enterprises in India has moved forward extensively since the Industrial
policy of 1991. The MSME sector has gained wide popularity in its scale and scope of business activities
over the years. It was noted that, in recent years the sector had a negative impact as a result of
demonetization, poor GST implementation and the biggest issue of all was the prolonged lockdown
caused by COVID-19. In order to mitigate the current situation, the Honourable Prime Minister of India,
Sri Narendra Modi, announced various economic relief programs to make India “Atmanirbhar” or “Self
Reliant”. The Finance Minister Smt. Nirmala Sitharaman, announced six regulatory measures under the
‘Atmanirbhar Bharat Abhiyan’ (ANBA) including for the MSME sector, through a series of government
announcements.

IMPORTANCE OF THE MSME SECTOR TOWARDS THE INDUSTRIAL

The MSME sector of India can play an important role in achieving the vision of self- reliant India. India
has already expressed a vision of “Atmanirbhar Bharat”, which will need the strengthening of the local
industries and their standing on an international stage. In this vision, MSMEs can become a major
growth engine, like how India became self- sufficient and the largest producer of milk in the world. The
remaining sectors within the MSME industry must also achieve the same.

“People work better when they know what the goal is and why”- Elon Musk

A paper by (Esra, 2020) states that India should progress from an agricultural based economy towards
an industrialised economy. The successful countries of the world broke the ruthless cycle of poverty by
industrialising, rather than concentrating on agriculture or the production of natural resources. It cannot
be achieved without giving an emphasis on the MSME sector. The MSME sector must be restored to
bring in opportunities for India, especially Foreign Direct Investment (FDI). Apart from bringing in
foreign direct investment (FDI), it also contributes to the exports, employment and manufacturing
outputs. The MSMEs also encourages industrial entrepreneurship. As India moves towards a rapid and
inclusive growth agenda, MSMEs will play an important part in it. MSME acts as a major contributor
towards the industrial exports and production.(Zanjurne, 2018). A paper by (Gade, 2018) also talks
about the importance of the MSME sector. The paper emphasises about the fact that, the MSMEs

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provide huge amount of employment at a lower cost of capital in relation to large industries. Thus,
MSME is known to be a speedy solution for reviving India’s economy and for the industrial
development of India.

According to (Singh, 2020) the leather and footwear industry which is part of the country's MSME
sector has a lot of potential due to the imbalanced trade confidence of the world from China. The paper
also mentions about the German footwear brand VON WELLIX, which has chosen to relocate its
assembling base from China to India.

Hence, the MSMEs will play a crucial role in the extensive growth of the industrial economy of the
country.

REALITY OF ‘MAKE IN INDIA’ WITH REFERENCE TO THE MSME SECTOR

In the past, our government has given prominence to large Multi-National Corporations, while the
MSMEs were overlooked. The Modi government in the year 2014 introduced a major national
programme ‘Make in India’, which emphasized the importance of many sectors including the MSMEs.
However, it turned out to be a futile attempt to make the MSMEs an integral part of the country's
industrial development for many reasons.

A paper by (Punjani, 2019) indicates that ‘Make in India’ became unsuccessful due to the lack of skill
development for the employees in the MSME sector. It points out that, the technical and industrial
training offered in India is not consistent with the requirements of the casual workers who comprise
90% of the labour force, thus leading to the shortage of skilled labourers at the national level. Apart
from the lack of skill development, unregistered MSMEs also tend to be a problem for the industrial
growth of the country. There is no pressure on entrepreneurs to approach the government agencies,
which means the government is not in the light, on what is happening at the bottom of the pyramid of
the enterprises. (Kochukulam, Peters, & Thomas, 2016)

Obtaining finance has also been a problem for the MSME sector. According to (Kadian & Aarti, 2015)
the reason behind the failure of the ‘Make in India’ scheme was due to the lack of access to the formal
sources of the finance that are costly which leads to higher cost of capital which in turn leads to poor
net cash inflow and reduces the creditworthiness.

Thus, ‘Make in India’ became a policy initiative with built in inconsistencies.

‘ATMANIRBHAR BHARAT’ A NEW VERSION OF ‘MAKE IN INDIA’

It was during the COVID-19 crisis, that the government saw an opportunity to kick-start the MSMEs,
which in turn will help India to become ‘Atmanirbhar’. The current working capital issue needs to be
addressed for the short term survival of the MSMEs. The government claims that, the same could be

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solved by the credit policy including the automatic collateral-free loans, introduced by the finance
minister under the ‘Atmanirbhar Bharat Abhiyan’ scheme.

A paper by (Datta & Bhattacharya, 2020) states that the MSMEs face the maximum heat, mainly due
to the liquidity crunch. Ventures working in the essential commodity market were well off in terms of
interrupted but predictable cash flow. For instance, Personal Protection Equipment (PPE), which is a
part of the essential commodity market, were not only satisfactory but were also successful. It is evident
from the growth of this sector that, from zero production of PPE kit (before March 2020) to 2 lakhs of
PPE units are being delivered day by day. The businesses in retail and manufacturing sectors and those
situated in the metro cities faces a huge difficulty in conducting their business operations. The three
lakh crore fund provided by the government in the form of collateral-free automatic loans will help the
small businesses to purchase raw materials and to pay off their bills. The MSME sector will be
resuscitated by extending the existing credit guarantee scheme to assist low rated finance companies in
which the government will bear 20% loss. (Sahu & Dubey, 2020) .

However, this credit policy introduced by the Ministry of Finance did not reach the majority of the
informal sector in India. According to (Mund, 2020) finance is mostly obtained from non-institutional
sources which includes loan from local money lenders, friends and relatives who charge an exorbitant
rate of interest. It is understood that, the benefits of Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE) is not available for the MSMEs and the medium enterprises should be included
as the beneficiary under the CGTMSE. The only potential beneficiaries under the scheme are, the
medium-sized enterprises with an average turnover of ₹ 87 crores and the average fixed investment in
plant and machinery of ₹ 22.6 crores. The reform for the MSMEs under the ‘Atmanirbhar Bharat
Abhiyan’ (ANBA) package does not benefit the informal sector. The policy, therefore, appeared like a
disguised subsidy for the private corporate sector. (Nagaraj & Vaibhav, 2020).

According to (Garib & Kumar, 2020) the extension of the receivables cycle together with the emergence
of contractual disputes, which would all weigh on the liquidity situation would cause further delays in
servicing the debt obligations. In order to tackle the same, collateral-free loans and moratorium period
were provided by the government.

“To contract new debts is not the way to pay old ones”-George Washington

Even though credit policies (collateral-free loans) are set up by the government to help in the short term
working capital problems of the MSMEs, it isn’t the right way of providing them financial support. The
government need to realize that industrialisation cannot be initiated by a series of bills passed in the
parliament. This research paper will examine further, to find different means of offering MSMEs
finance rather than letting them take a loan on which they will have to pay a higher rate of interest. The
mere imposition of liquidity will not help small businesses in the long run and will push their balance

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sheet to further deterioration if the demand is not revived. Prof Abhijit Banerjee, Nobel Prize laureate,
said that the purchasing power of the people in India is very low and there is a huge decline in the
demand in the market during the pandemic.

Hence, the research paper will investigate further on how to give direct income support to the common
people because they are the ones that run the economy, not the rich ones. By improving the income of
the common man, the demand will increase and will give the MSMEs more finance. During the
lockdown, MSMEs who could embrace the digital presence could continue to serve some semblance of
normalcy like the educational sector. Hence apart from finance, the elements like infrastructure and
technology which is required for the survival of the MSMEs will also be explored.

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REFERENCES
Datta, K. K., & Bhattacharya, U. (2020). An Attempt Towards Reviving the Indian Economyfrom
Extreme Slowdown to Survival : Introspections. Indian Journal of Finance and Economics.
Esra, S. D. (2020). Covid-19 and MSMEs : A Revival Framework. Research Journal in Advanced
Humanities.
Gade, D. S. (2018). MSMEs' Role Economic Growth - A Study on India's Perspective . International
Journal of Pure and Applied Mathematics.
Garib, M. F., & Kumar, G. S. (2020). A Retrospective Study on Post- COVID Challenges on Indian
Financial and Business Sector. Journal of Xidian University.
Kadian, R., & Aarti, C. (2015). Make India innovative and Competitive Role of MSMEs.
International Journal of Research in Social Science and Humanities.
Kochukulam, C. A., Peters, M. J., & Thomas, J. K. (2016). Make in India Opportunities and
Challenges - A study based on MSMEs in Kerala. SSRN Electronic Journal.
Mund, C. S. (2020). Problems of MSME Finance in India and Role of Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE). IOSR Journal of Economics and Finance
(IOSR-JEF).
Nagaraj, R., & Vaibhav, V. (2020). Revising the Definition of MSMEs: Who is Likely to Benefit
From it? The Indian Journal of Labour Economics .
Punjani, P. K. (2019). A Study on the Requirement of Skills Development for the Success of "make in
India" Project. Tactful Management Research Journal.
Sahu, K. K., & Dubey, P. (2020). MSMEs in COVID-19 Crisis and India's Economic Releif Package:
a Critical Review. AIJR Preprints.
Singh, B. (2020). Post COVID-19: Opportunities in Indian Footwear and Leather Industry with
refernce to MSME Stimulus and Special Role of Council for Leather Exports. The Corporate
International.
Zanjurne, P. (2018). Growth and Future Prospects of MSME in India. International Journal of
Advanced Engineering, MAnagement and Science (IJAEMS).

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PLAGIARISM REPORT

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