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MSME Sectors - Raising and Accelerating MSME Performance (RAMP) Program

MSME Sectors - Raising and Accelerating MSME Performance (RAMP) Program

Context:

  • The World Bank has approved a USD 500 million program to revitalise India's MSME sector, which has been heavily impacted by the COVID-19 crisis.

  • MSME sector is the backbone of the country's economy, contributing 30 % of India's GDP and 40 % of exports.

Features of the Programme:

  • It is part of the government's USD 3.4 billion MSME Competitiveness - A Post-COVID Resilience and Recovery Programme (MCRRP).

  • First intervention being the USD 750 million MSME Emergency Response Program.

  • The USD 500 million RAMP Program is the World Bank's second intervention in this sector.

  • The USD 500 million loan from the International Bank for Reconstruction and Development (IBRD), has a maturity of 18.5 years including a 5.5-year grace period.

Significance of RAMP and MCRRP for MSME Sector:

  • It targets improvements in the performance of 555,000 MSMEs and is expected to mobilise financing of USD 15.5 billion.

  • Finance Availability: To date, 5 million firms have accessed finance from the government program. With the program approved today.

  • Productivity and Financial Viability: World Bank's financing towards improving the productivity and financial viability of the MSME sector amounts to USD 1.25 billion over the past year.

  • It addresses the immediate liquidity and credit needs of millions of viable MSMEs severely impacted by the ongoing COVID-19 pandemic.

  • Dispute resolution mechanisms: It will also scale up online dispute resolution mechanisms to address the problem of delayed payments.

  • The RAMP program will intensify efforts to support firms to return to pre-crisis production and employment levels.

  • It will lay the foundations for longer-term productivity-driven growth and generation of much-needed jobs in the MSME sector.

  • Such efforts are expected to improve the cost-effectiveness, quality, accessibility, impact, and outreach of such schemes.

  • The RAMP program will support the Government's MCRRP objective of providing a more

    • Comprehensive and coordinated Centre-State approach

    • Improve MSME sector productivity,

    • Reduce the gender gap, and

    • Promote more environmentally sustainable investments."

MSME sector:

  • MSME sector is the backbone of the country's economy, contributing 30 % of India's GDP and 40 % of exports.

  • Out of some 58 million MSMEs in India, more than 40 % lack access to formal sources of finance.

Several challenges faced by MSMEs:

  • Lack of Finances: There is need to strengthen access to formal sources of financial and non-financial services, including of women headed MSMEs.

  • Centre- State Coordination: Strengthen coordination in the national and state MSME support programs.

  • Geographical spread: Given the magnitude and geographical spread across the country, direct interventions can be prohibitively costly.

  • It targets improvements in the performance of 555,000 MSMEs and is expected to mobilise financing of USD 15.5 billion.

WAY FORWARD:

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Source: Business Standard