The share of industry sector in the GDP of Gujarat is nearly 44.50%, compared to the service sector, which contributes 36.10%. This trend is much different from the national level, where industry and service sectors contribute 20% and 54% respectively Gujarat is a leader in industrial sectors such as Chemicals, Petrochemicals, Dairy, Drugs and Pharmaceuticals, Cement and Ceramics, Gems and Jewellery, Textiles and Engineering. Information Technology (IT) is an emerging sector in the State. According to ASSOCHAM Economic Research Bureau (AERB), investments attracted by Gujarat in the IT sector increased from a meagre 700 crore in 2005-06 to over 35,200 crore in FY 2015-16, thereby clocking a compounded annual growth rate (CAGR) of about 48 per cent during the decadal period.
With an aim to provide an impetus to the development of farmers, Gujarat Government announced a comprehensive “Agro Business Policy 2016-21“. Its aim is to attract investment in agriculture, enhance agricultural productivity and increase income of farmers. Food processing units as well as agricultural infrastructural projects would be provided with various kinds of assistance under the new policy to ensure that the farmers of the State get the maximum benefit of high demand of quality agricultural products all across the world. The Gujarat Garment and Apparel Policy 2017 aims at creating one lakh jobs especially for women and to create investment opportunities in the value chain.
In order to reinforce industrial development in the State, the government has unveiled Gujarat Industrial Policy 2020 on 07 August 2020 with a vision to make Gujarat a Global Business Destination for next-generation sustainable manufacturing & service industry driven by state-of-the art infrastructure, employment generation, inclusive & balanced regional development and thereby contribute significantly to “Aatmanirbhar Bharat“.
Micro, Small and Medium Enterprises (MSME)
MSME Sector has been recognized worldwide as an Engine of Economic growth and for promoting equitable development of a country. This sector is capable of generating huge employment opportunities with low capital, operational flexibilities and quick adoption of technologies. MSMEs are backbone of Indian economy as nearly 63 million MSME contribute around 45% to manufacturing output, more than 40% to exports, over 28% of the Indian GDP while creating employment to 111 million people. Under ambitious plan of Government of India to make India a 5 Trillion USD Economy by 2025, MSME Ministry has set a target of 50% MSME contribution to GDP. MSME constitute 95% of total industrial units in our country.
Ministry of Micro, Small and Medium Enterprises has redefined from 01 July 2020 which is as under:
- A Micro Enterprise, where the investment in Plant and Machinery or Equipment does not exceed 1 Crore and turnover does not exceed 5.00 Crores.
- A Small Enterprise, where the investment in Plant and Machinery or Equipment does not exceed 10.00 Crores and turnover does not exceed 50.00 Crores.
iii. A Medium Enterprise, where the investment in Plant and Machinery or Equipment does not exceed 50.00 Crores and turnover does not exceed 250.00 Crores.
The above new definition covers almost 99 per cent of all firms enabling MSMEs to grow in size and create jobs with the removal of artificial separation between manufacturing and service MSMEs.
MSME schemes and initiatives
- Distressed Assets Fund -Subordinate Debt for MSMES- Credit Guarantee Scheme for subordinate debt for stressed MSMEs as equity/quasi equity from the promoters for purpose of debt-equity computation. ii. Fund of funds to infuse equity worth 50000 Crores in the MSME Sector:
iii. Champions Portal an ICT based technology system for making the smaller units big by helping and handholding them.
- Prime Minister’s Employment Generation Programme (PMEGP) a major credit-linked subsidy programme aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by assisting traditional artisans and unemployed youth in rural as well as urban areas.
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to facilitate flow of credit to the MSE sector without the need for collaterals/ third party guarantees.
- Cluster Development Programme a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSES) and their collectives in the country.
vii. Scheme of Fund for Regeneration of Traditional Industries (SFURTI) with an aim to organize the traditional artisans into clusters and to make the Traditional Industries more productive, profitable and capable for generating sustained employment.
viii. Technology Centres/Tool Rooms for providing practical skill development training to more than 2 lakh unemployed youth and industry workforce per year.
- Credit Linked Capital Subsidy for technology upgradation of Micro and Small enterprises in the country. Under the scheme, 15 per cent capital subsidy is provided to the eligible MSES for upgrading their technology with the well-established and improved technology as approved under the scheme.
- Technology Upgradation Scheme envisages another activity, namely, Product Quality Certification with the to encourage MSMEs to Acquire Product Certification Licenses from National / International Bodies, thereby improving their competitiveness.
- Public Procurement Policy for MSES Order, 2012 for promotion and development of Micro and Small Enterprises by supporting them in marketing of products produced and services rendered by them.
xii. GeM- Government e-Marketplace for online procurement of goods and services by central and state government organizations of MSMEs. As part of AatmaNirbhar Bharat Abhiyan I, it was decided to disallow global tenders for government procurement up to 200 crore to support Make in India.
xiii. Skill Development for self-employment as well as wage employment. All type of programmes have input which provide necessary information and skills to a trainee to enable him to establish his own micro or a small enterprise.
Recent initiatives of RBI for MSMES
- Special Liquidity Facility to SIDBI for MSMES: RBI has provided a Special liquidity facility of 15,000 crores to the Small Industries Development Bank of India (SIDBI) to meet the funding requirements of micro, small and medium enterprises (MSMEs).
2.Additional Liquidity Facility to SIDBI for MSMEs: In order to meet MSMEs short- and medium-term credit needs to kick start the investment cycle with additional focus on smaller MSMEs and businesses including those in credit deficient and aspirational districts, RBI has provided a further special liquidity facility of t16,000 crores to SIDBI. The facility would be extended for on-lending/refinancing through novel models.
- Enhancement of the Exposure Thresholds under Resolution Framework 2.0: The Resolution Framework 2.0 announced by the Reserve Bank on May 5, 2021 stipulated a maximum aggregate exposure of 225 crores for considering resolution of CoVID-19 related stress of MSMEs as well as non-MSME small businesses, and loans to individuals for business purposes. The above exposure threshold was enhanced to 250 crore.
- Fresh lending to MSMEs was allowed equivalent exemption from the Cash Reserve Ratio (CRR).
- Lending by small finance banks (SFBs), micro finance institutions (MFIs) – NBFC- MFIs and others- with gross loan portfolios of up to 225 crore by end-March 2021 -was made eligible for reckoning as priority sector lending (PSL) and such loans can be deducted from net demand and time liabilities (NDTL) for cash reserve ratio up to end December 2021.
- Implementation of recommendations of Expert Committee on MSMEs: The committee had made 37 broad recommendations. Out of 21 recommendations pertaining to the Reserve Bank, 11 have already been implemented and remaining are under consideration. The major recommendations, which were implemented, include (i) introduction of video-based Know Your Customer (KYC) norms; (ii) increase in the threshold limit for regulatory retail portfolio of banks from 25 crores to 27.5 crore; (iii) creation of Payment Infrastructure Development Fund (PIDF) to provide impetus to acceptance infrastructure to promote digital payments and commerce platforms for rural MSMEs; and (iv) co-lending model for all NBFCs.
- All cooperative banks were included as Eligible Lending Institutions (ELIS) under the “Interest Subvention Scheme (ISS) for MSMES 2018” of the Government of India with effect from March 3, 2020. The ISS for MSMEs 2018 (as amended) provides for an interest relief of two per cent per annum to eligible MSMEs on their outstanding fresh/incremental term loan/working capital and limited to the extent of ti crore during the period of its validity, subject to the conditions prescribed in the Scheme.
- RBI deregulated the interest rates on advances by SCBS (excluding RRBs). With a view to strengthen the transmission of monetary policy, the banks were mandated to link all new floating rate personal or retail loans and floating rate loans extended to MSMEs to external benchmarks such as repo rate, Treasury Bill Rate and any external benchmark published by Financial Benchmarks India Pvt Ltd (FBIL).
- RBI had issued instructions to banks during 2009, 2016, 2020 regarding introduction of Debt Restructuring Mechanism for MSMEs for revival of potentially viable sick units/enterprises and non-discretionary One Time Settlement scheme for recovery of non-performing loans for the MSE sector. Framework for Revival and Rehabilitation of MSMEs. The Ministry of MSME, Government of India, vide their Gazette Notification dated May 29, 2015 had notified a ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises’ to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs. -2.6 Status and trend in MSME financing in Gujarat