HomeFinance Minister Pranab Mukherjee (in pic), presenting the Union Budget 2009-10 on July 6, has given some respite to the MSME sector. Acknowledging that the slowdown in exports due to the global demand slump has hit small and micro units the hardest, the minister has proposed the formation of a special fund for the sector.
The proposed fund, worth Rs 4,000 crore,will be formedout of the Rural Infrastructure Development Fund (RIDF) and provided to the Small Industries Development Bank of India (SIDBI).
This fund is expected to incentivise banks and State Finance Corporations (SFCs) to extend loans to MSMEs by refinancing 50% of incremental lending to these players during 2009-10. According to the minister, this move will facilitate credit flow at affordable rates for MSMEs and thereby provide them the much-needed fiscal support.
The announcement of the proposed fund has lifted the spirits of the MSME segment. 'For several months we have seen suffering due to the credit crunch. We hope that with the formation of this fund we will be able to get adequate funds to revive our business,' said GC Ghosh, proprietor of Radha Export International, a small-sized basmati rice exporting company in Kolkata.
CII praises budget
The Confederation of Indian Industry (CII) has appreciated the budgetary initiatives taken by the Finance Minister for boosting the MSME sector. The apex industry body has also lauded the minister for the focus on growth, investments and infrastructure in the Budget.
The CII believes that the provisions for the small players in the Budget will not only benefit them in the near term but over a period of time. Furthermore, it will help the small industries become more competitive and strengthen their foothold in the domestic as well as the international markets.
'The Budget clearly shows that the government has realised that small firms like ours are in dire straits. Although many banks have lowered their prime lending rates (PLRs) in the recent past, we need more funds to sustain our business. Hence, the special fund announced in the Budget will be of immense help to us,' said V Sharma, proprietor of All India Plastic Products, a small-sized Plastic Products Manufacturers firm in New Delhi.
Going by the positive reactions of the CII and small entities, it seems, at least for now, that the Finance Minister has been able to address the grievances of MSMEs well.
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