In-Depth: What’s govt’s Rs 6,000-cr plan with its RAMP programme for MSMEs

Posted On Feb 12, 2022 By admin With Comments Off

Credit and Finance for MSMEs: Finance Minister Nirmala Sitharaman in her fund lecture this year had announced the rollout of the Raising and Accelerating MSME Performance( RAMP) programme in the coming five years. RAMP has is an element of the initiatives by the government to revitalize micro, small-scale and medium-sized enterprises in the post-Covid world. However, it is perhaps one of the largest mid-to-long-term initiatives in size and scope in recent years dedicated to MSMEs.

What is RAMP

RAMP is a central government scheme in partnership with the World Bank for five years- FY22 to FY26 to boost productivity and financing for Covid-hit MSMEs. It was announced last year with a total project cost of Rs 6,062.45 crore, of which World Bank’s contribution was earmarked at Rs 3,750 crore under the Credit Linked Capital Subsidy and Technology Upgradation Scheme.

The programme was launched on the basis of the recommendations from the UK Sinha Committee report in June 2019. The report had advocated multiple regulatory, monetary, and implementation reforms for targeted interventions among MSMEs to solve their remembered challenges, the biggest being shortcoming of access to economical approval and capacity building.

Importantly, RAMP is the second programme by the World Bank for MSMEs that was approved in June last year. The first programme Emergency Response Program for Micro, Small, and Medium Enterprises of $750 million( around Rs 5,600 crore) was signed in June 2020 with the Indian government.

The programme had targeted to address the immediate liquidity needs of around 1.5 million MSMEs. The credit was routed through targeted guarantees to incentivize non-banking monetary companies( NBFCs) and banks to lend to practicable MSMEs. While the latest data on the MSMEs supported under the first programme was not disclosed, 50 lakh firms had accessed finance from the first programme as of June 4, 2021, as per the World Bank.

How it will help MSMEs

The World Bank had last year targeted to support 5.55 lakh MSMEs through the RAMP programme. The initiative will universally places great importance on first, strengthening institutional capacity and coordination for MSMEs, and second, corroborating MSMEs’ capabilities and access to marketplaces and finance.

” At the national level, MSME policies and programmes are implemented across ministries and departments, including key players such as the Reserve Bank of India( RBI) and the Small Manufacture and Development Bank of India( SIDBI ). There existed myriad state-level initiatives with limited coordination amongst them. There is a need for “convergence” of plans, programs, and intrigues at all levels, ” World Bank had said in a statement.

To bring that convergence, the programme will help set up a high-level MSME Council to enable better coordination between national and state-level programmes. Furthermore, state-level Strategic Investment Plans( SIPs ), in agreement with the World Bank, will be opened by a roadmap and discernible metrics; enhance the capacity of the MSME ministry to design, implement and assess policies and programmes through digital platforms and data systems.

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Further, it would afford better access to finance and working capital for MSMEs and scale-up online dispute resolution mechanisms to address the problem of delayed remittances. The World Bank said such efforts are expected to improve the cost-effectiveness, tone, accessibility, blow, and outreach of such programmes.

“The RAMP programme will intensify efforts to support firms to return to pre-crisis production and employment levels while laying the foundations for longer-term productivity-driven growth and contemporary of much-needed jobs in the MSME sector, ” Junaid Ahmad, World Bank Country Director in India had said in the statement last year.

Out of around 58 million MSMEs in India, more than 40 per cent lack access to formal sources of finance, distributed according to The World Bank. As per the MSME Ministry, the sector has created 11 crore jobs in India. Importantly, India’s unemployment rate had recorded a sharp-worded quit to 6.57 per cent of cases in January — lowest since March last year on the back of gradual economic recovery with relaxation in Covid regulations along with a decline in Omicron instances, as per the Centre for Monitoring Indian Economy( CMIE ).

“To boost employment, including the MSME sector and too to improve their productivity and continued viability, science improvement is needed more than skill development. What you draw is important but how you move is more critical and too how efficiently you are eligible to realize. MSMEs must clearly define their make marketplaces, study them, and then look at launching makes to cater to the right demand, ” Debdulal Saha, Assistant Professor — Humanities and Social Science, Indian Institute of Science Education and Research, Mohali told Financial Express Online.

According to India Ratings& Research, the RAMP programme will help the MSME sector in scale up by providing formal sources of finance, acting as a pulpit where MSMEs and suppliers can come together. Likewise, “the large-scale, cost-effective integration to be implemented under the RAMP intrigue is an opportunity for the Ministry of MSME and states to improve its monitoring and evaluation capability which will connect the information gap and improve the efficiency of the system, ” the rating agency had said on Tuesday.

What’s the current status

The detailed guidelines around eligibility criteria, application and disbursement process, repayment, and more have still to be flattened out. Likewise, state-wise speculations and approbations for the programme have not been prepared since Cabinet approval for RAMP is awaited, MSME Ministry had said in a statement in December last year.

RAMP will focus on five first mover’ states- Gujarat, Maharashtra, Punjab, Rajasthan, and Tamil Nadu that are home to reportedly 54 per cent of the members of all cross-file MSMEs in “the two countries “. The 3,750 -crore loan from World Bank’s lending arm — International Bank for Reconstruction and Development( IBRD) has a maturity of eighteen. 5 years including a 5.5 -year grace period.

” Beyond the credit endorsement through such gigantic programs, if there is one area that needs more attention, it is MSME knots. They represent a big role in the success of MSMEs due to the ecosystem or network effect they make. China has advocated assemble development for their businesses. The current pace of collection development in India is not enough to enable the large scale growth of MSMEs. There is a larger ecosystem needed with the presence of bigger conglomerates from respective sectors to strengthen the supplier-buyer relationship, ” Dr Rajdeep Singha, Assistant Professor, Centre for Labour Studies& Social protection systems at Tata Institute of Social Science( TISS ), Guwahati told Financial Express Online.