Draft National Policy for MSMEs Notified

The draft national policy for MSMEs was notified on 2nd March, 2022. It aims to address pressing sectoral issues in the areas like intergovernmental roles and responsibility, legislation and regulatory framework for MSMEs in India, access to finance, technology upgradation/adaptation, skill development, knowledge management, ease of doing business, development of MSME Code and exit code. The objective of the draft policy is to create a robust framework for affordable technology upgradation and sustaining a conductive environment that proffers ease of doing business for MSME with a competent exit code.

The action areas were identified following the observations by KV Kamath Committee in 2015, One Member Committee report by former cabinet secretary Prabhat Kumar in 2017 and RBI Committee and Working Group report in 2019.

The Draft Policy observed that, “the MSMED Act does not provide any moratorium from seeking approvals/inspections which becomes a barrier in the ease of doing business for MSMEs. There is a need to suitably relax the process. Accordingly, a set of modification is required to ensure – Production First & Permission Later.”

Intergovernmental Role and Responsibility: Identifying the existing friction of work that the intergovernmental system created for MSMEs at the central, state and local levels. The policy has recommended a host of guidelines for each of these to encourage better coordination between the bodies and merge the gaps that intergovernmental systems often create.

Legislation/Regulatory Framework for MSMEs in India: From the MSME Development Act to state MSME policies, the draft has identified segments that demand simplification of the existing regulations for the MSMEs. These include dispute resolution within 90 days, a streamlined and seamless registration process, structuring a simplified winding up framework for MSMEs etc.

Access To Finance: The policy suggests that the loan application process and forms should be made simpler for MSMEs. Further, they should be encouraged to obtain Zero Defect Zero Effect (ZED) Certification from QCI which shall aid banks to extend credits and other key measures that could help MSMEs improve their credit capacities.

Technology Upgradation: The draft has recommended the establishment of Centres of Excellence with specialised staff to periodically study issues faced by MSMEs and build capacity through SOPs, and develop tech-enabled skill sets.

Skill Development: The draft has observed a pressing need to converge skill development schemes by the government at the district level, of different ministries such as NULM of Ministry of Housing and Urban Affairs, NRLM of Ministry of Rural Development, schemes of Ministry of Skill Development etc. to promote a holistic and skilled human resource development for the sector.

Knowledge Management: The draft has recommended developing varied innovative strategies to connect suppliers with buyers both national as well as international, at the district, state and central level.

Ease of Doing Business: The draft also recommends providing an all-encompassing legal help to micro-enterprises, linking trade clusters and MSME centres, and a state-level helpline and national level chat services.

Exit Code: As per the Draft, MSMEs should be aligned with the Fast Track Corporate Insolvency Resolution Process under the provision of Insolvency and Bankruptcy Code, 2016 to establish a seamless winding-up process for MSMEs.