Economy

Shaktikanta Das: MSME sector emerged as growth engine of economy: RBI Governor Shaktikanta Das

Read more at economictimes.indiatimes.com

Outlining the emerging post Covid opportunities in India, Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said that the MSME sector in India has emerged as the growth engine of economy with a vast network of about 6.33 crore enterprises, contributing 30% of GDP and approximately 50% to exports. Speaking at the 185th foundation day of the Bombay Chamber of Commerce and Industry, Das added that the sector has been rendered especially vulnerable by the pandemic, necessitating concerted efforts to combat the stress and focus on revival of the sector.

“Two major schemes – Emergency Credit Line Guarantee Scheme (ECLGS) and Credit Guarantee Scheme for Subordinate Debt (CGSSD) were introduced by the government. These have been duly supported by various monetary and regulatory measures by the RBI in the form of interest rate cuts, higher structural and durable liquidity, moratorium on debt servicing, asset classification, loan restructuring packages and CRR exemptions on varied disbursed to new MSME borrowers,” he said.

Among the other sectors that he highlighted as an emerging opportunity included the manufacturing and infrastructure sector. The manufacturing sector, he said, is spearheading growth recovery as many contact intensive services sectors are severely affected by the crisis. “The initiatives of the government under the Aatmanirbhar Bharat Abhiyan and Union Budget 21-22 towards developing a vibrant manufacturing sector and infrastructure acknowledges the strong linkages they have with the rest of the sectors,” he said.

He further added that the Productive Linked Incentive (PLI) scheme aims to make India an integral part of the global value chain. “This along with reforms in the labour market can go a long way in propelling growth to an elevated trajectory for the manufacturing sector and reap its employment potential in India,” Das explained.

Shifting focus to technology and innovation, Das said this was another area where many small sized units are playing a significant role and gradually making their presence felt. Delving into statistics, he shed light on how digital penetration in India has gained a new high. “The time has come to leverage its applications while at the same time strengthening the digital infrastructure. With approximately 1.2 billion wireless subscribers and 750 million internet subscribers, India is the second largest and one of the fastest growing markets for digital consumers. As digital capabilities improve and connectivity becomes omnipresent, technological innovation and tech driven revolution are poised to radically change India’s economy. They have the potential to raise the productivity of agriculture, manufacturing and businesses as well as improve delivery of public services such as health and education,” he elucidated.

He also predicted the healthcare sector to witness strong growth in the coming years with its commitment to R&D and low cost of production. “Post Covid, the healthcare sector has emerged as a major faultline as well as a sector with tremendous growth opportunities. With a network of more than 3000 companies, India now ranks third globally for pharmaceutical production by volume with the sector generating a trade surplus of $12 billion annually,” he said.

Emphasising on exports as another area which will show a lot of opportunity in the times to come, Das said that the PLI scheme has identified a few champion sectors that will support domestic manufacturers in achieving economies of scale and expanding their footprint in the global market. “The response from companies especially pharmaceuticals, electronics and medical devices industry to this scheme is reported to be very encouraging. This export push is likely to come from other sectors such as food products, apparel and textiles, capital goods, automobiles and electronics and semiconductors. Since the incentive structure under the PLI scheme is envisaged for next 5 years, the domestic industry needs to develop its strength by focusing on quality and export competitiveness in order to remain viable in the long run,” he added.

Elaborating further, he said that another area expected to give a push to India’s exports and growth is the Free Trade Agreements (FTAs) with key strategically important economies. “Key considerations should be to identify countries and regions that not only have the potential as a market for domestic goods and services but also have the scope to enhance domestic competitiveness i.e. domestic competitiveness of India especially in sectors covered under PLI scheme,” he stated.

Das also said that with greater emphasis on carrying out business operations with efficiency, there had been an increased demand for cutting edge software services and new business opportunities brought about by the ongoing global value chain configuration.

Reflecting on the year gone by, Das said that globally governments have unveiled large stimulus packages in 2020 amounting to nearly $14 trillion which was equivalent to 13.5% of the world GDP and this was done to contain the strength of the pandemic. Applauding India’s role in containing the pandemic, he said that in contrast to the rest of the world, the caseload of Covid in India has declined. “We are on the cusp of a turnaround in fortunes. The battle of 2020 has been won, albeit with significant costs in terms of loss, livelihood and economic activity. We need to win the battle of 2021 also,” he concluded.

Read more at economictimes.indiatimes.com

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