Government announces significant package for MSME sector, loan assistance of ₹3 lakh crores

New Delhi: The details of the economic package of ₹ 20 lakh crores, announced by Prime Minister Narendra Modi, were given by Finance Minister Nirmala Sitharaman on Wednesday. The Prime Minister had said that the cottage, home, micro, small and medium industries, employing millions of people, are the firm foundation of the ‘Self-reliant India Campaign’. Finance Minister Nirmala Sitharaman made important announcements for these very Micro, Small and Medium Industries (MSME) sector. Government has announced a package of ₹3 lakh crores for the MSME sector and has even redefined the criteria to qualify. At the same time, the government announced that only Indian companies could bid for any government tenders up to ₹ 2 billion. Finance Minister Sitharaman underlined that there would be no global tenders issued for this quantum. Government has changed the definition of the MSME sector and has also increased the qualifying investment criteria. Now companies with investments up to ₹ 10 million and turnover up to ₹ 50 million will qualify for the Micro category. Companies with investments up to ₹ 100 million and turnover up to ₹ 500 million will be eligible for the Small category, and companies with investments up to ₹ 200 million and turnover up to ₹ 1 lakh crore will qualify for the Medium category. Before this, industries with investment up to ₹2.5 million were qualified for the MSME category. But now, the criteria have been modified. With this change in qualifying criteria, as regards to the investment and turnover, existing businesses from the manufacturing and services sector will also be eligible for the MSME category. This will enable them to avail government schemes. Thus, this will provide an impetus to the manufacturing and services sector.


The MSME sector is a major contributor to the country’s Gross Domestic Product (GDP). The sector employs nearly 120 million people. But this sector was grappled with a crisis since some time now. The Coronavirus pandemic added to the woes of the sector. The liquidity crunch was haunting the sector. Against this background, Finance Minister Nirmala Sitharaman announced ₹ 3 lakh crores for loans without collateral for this sector. By taking advantage of the scheme, the ailing MSME businesses will be able to get the trade activities back into motion. It is claimed that this will also result in saving the jobs in these companies threatened by the crisis. Confidence is being expressed that this scheme will benefit 4.5 million MSME sector companies.

Moreover, there is a provision for capital infusion into the MSME companies, planning to expand but facing capital crunch for the purpose. Sitharaman announced that provision for this assistance is pegged at ₹500 billion.

At the same time, the government announced help with EPF for the employees and labourers from various sectors. The government paid the employee provident fund (EPF) contribution both the employer and the employee (12% each) for the months of April and May, for the companies having up to 100 employees and earning up to ₹ 15,000 per month. The support will continue for the next three months. A provision of ₹250 billion has been made for this, and 7.2 million workers will benefit from this. The Private sector employees had to contribute 12% towards EFP. This has been brought down to 10%. This amendment also will benefit the MSME sector the most.

Meanwhile, government departments have been ordered to clear all the pending payments to the MSME companies. The deadline for completion of the ongoing projects has been extended by six months. A certain portion of the deposit made by the contractor will be refunded to him, provided that more than 50% of the project work has been completed. The logic behind the decisions is that it will increase liquidity in their hands, and they will be able to complete the remaining work in the extended timeline. The states have been ordered, by the union government, to extend the project completion deadlines, for all the housing projects registered under RERA. Finance Minister Sitharaman also announced a package of ₹900 billion for the electricity companies facing a funds crisis because of increasing outstanding.

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