GeM crossing new merchandise value milestone holds significance for MSMEs

The Government e-Marketplace (GeM) on 20 April crossed a new milestone with a gross merchandise value of Rs 4 lakh crore since its launch as a national public procurement portal for procurement of goods and services for Central and state government organisations. This has significant connotations for India’s Micro, Small and Medium Enterprises (MSMEs) and small businesses who are a formidable chunk of participants in government tenders through GeM getting new business opportunities. Commerce Minister Piyush Goyal said in a tweet, “Winning with trust. Modiji has ensured transparency and a level-playing field for MSMEs and small businesses.”
The conscious empowerment of this industry sub-sect which contributes approximately 30 per cent of the country’s GDP and 45% of manufacturing output, today, translates into 116% growth of cumulative transaction value of goods and services bought by government ministries from MSMEs through the GeM portal at around Rs 3.13 lakh crore from Rs 1.44 lakh crore during October last year. In FY 2022-23, MSMEs sold 88% more goods to the Government from the previous fiscal FY2021-22. As per Government data presented in Lok Sabha on 29 March 2023, MSMEs sold goods worth Rs 422.02 crore in FY17, Rs 5,876.53 crore in FY18, Rs 17,461.61 crore in FY19, Rs 22,916 crore in FY20 and Rs 38,570 crore in FY21. Moreover, the number of sellers including MSMEs registered on GeM has also crossed the 60-lakh mark from 50 lakh sellers as of August 2022, adding 10 lakh sellers in around seven months.
There is also the flip side for MSMEs as Crisil Market Intelligence & Analytics finds. In fiscal 2021, when corporate revenue declined 1%, MSMEs witnessed a steeper decline of 6-8%. In fiscal 2022, while corporate India grew 25% on-year, MSMEs recovered at a slower pace of 21 per cent but MSME revenue finally surpassed the pre-Covid level in fiscal 2022, thanks to healthy exports, higher commodity prices, and increased healthcare demand due to the pandemic. “However, slower growth for SMEs in fiscals 2021 and 2022 than corporates led them to lose market share to their larger counterparts. They were affected more by supply chain and structural issues during the pandemic,” says the Crisil report. In fiscals 2023 and 2024 MSME growth is expected to be lower than that of corporates, leading to a further loss in market share of SMEs, the report cautions.
On a more worrying note, Bank of Baroda Bob sees a marked slowdown in credit demand from the MSME segment. In fact, while credit growth to micro and small segment has moderated from 29% in April 2022 to only 13.7% in December 2022, for medium industries the decline has been much alarming from 53.5% to just 15.4% in December 22. However, on a sunnier note, the sector has been given benefit in the revamped credit guarantee scheme for MSMEs in the Budget through an infusion of Rs 9,000 crore enabling credit flow of Rs 2 lakh crore with a 1% lower cost. Secretary, MSME B.B Swain says his Ministry and Small Industries Development Bank of India (SIDBI) has been working together to launch a formalisation project in January this year to address the challenge of formalisation of the informal micro enterprises. “About 13 lakh informal micro enterprises have already been brought into the formal ambit through the project which also facilitates access to affordable credit and benefits of priority sector lending,” Swain informed at an ASSOCHAM industry event recently. “The reduction of guarantee fees for MSMEs will be started from 1 April 2023. The reduction will likely be to the tune of 50 per cent below 1 crore. The new PM VIKAS program for artisans and craftsman will strengthen the MSME sector in the country,” he added. There is more support coming with the SIDBI—development financial institution for promotion, financing and development of MSMEs—setting up an exclusive cluster development initiative and a SIDBI Cluster Development Fund (SCDF). The support is offered by SIDBI to state governments/ UTs as a soft loan for a tenure of 7 years. Since launch of the SCDF scheme on 5 August 2021, Rs 5546.50 crore has been sanctioned to 10 states and 1 UT towards 91 projects including 64 greenfield projects and 27 brownfield projects. It is estimated that 84,127 MSMEs, shall be benefitted and direct employment of 5,81,873 and indirect employment of 7,31,397 shall be created from assisted projects. Encouraged by a slew of other Government and private initiatives, MSMEs are widening their domain across sectors of the economy, contributing significantly to the expansion of entrepreneurial endeavours through business innovations and producing diverse range of products and services to meet demands of domestic as well as global markets.
Recognising this as an opportunity, DataTech Non Banking Finance Company, U GRO Capital, is revolutionizing MSME lending with the recently launched GRO X App. “This credit line on UPI for MSMEs utilises data analytics and technology to enable small business owners, retailers, traders, professionals, and small manufacturers across India to obtain collateral-free instant credit for immediate working capital requirements and to manage their financial liquidity. The company plans to acquire and service over 1 million MSME customers in the next 3 years on GRO X platform. Hardika Shah who founded Kinara Capital in 2011 with the mission to address the acute credit gap in the MSME sector in India, provides fast and flexible business capital to small business entrepreneurs. About 90% of Kinara’s customer base is new to credit, receiving its first-ever business loan from the company. Their work has led to an incremental income generation of Rs 700 crore for small business entrepreneurs, and led to more than 250,000 jobs created or sustained.
Innovative measures are being put in place to address the challenge faced by MSMEs of access to adequate finance and competitive rate of interest, especially in affordable financing for electric vehicles to address India’s ambitious climate change mitigation target and goal of low-carbon growth. The EV30@30 initiative of SIDBI, under guidance of NITI Aayog and Ministry of Finance intends to unlock the market by providing better financing terms and to understand other solution bouquet needed to address the above issues.