The Emergency Credit Linked Guarantee Scheme shielded India's micro, small and medium enterprises from financial distress, with their quick recovery supported by "remarkably high" credit growth, reflected in the rise of goods and services tax paid by the units, as per the Economic Survey 2022-23 tabled in Parliament on Tuesday.
India has more than six crore micro, small and medium enterprises that employ close to 12 crore workers across sectors and industries while contributing nearly 35 per cent to the country's gross domestic product (GDP). In FY21, the government announced the Emergency Credit Linked Guarantee Scheme, which succeeded in shielding micro, small and medium enterprises from financial distress.
According to the survey, "The credit growth to the micro, small and medium enterprises sector has been remarkably high, over 30.6 per cent on average during January-November 2022, supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government."
"The recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay, while the Emergency Credit Linked Guarantee Scheme is casing their debt servicing concerns," it added. Quoting a recent CIBIL report (ECLGS Insights, August 2022), the survey said it showed that the scheme has supported MSMEs in facing the COVID shock, with 83 per cent of the borrowers that availed the ECLGS being micro-enterprises. Among these micro units, more than half had an overall exposure of less than Rs 10 lakh.
Furthermore, CIBIL data also showed that ECLGS borrowers had lower non-performing asset rates than enterprises that were eligible for ECLGS but did not avail of it, the survey pointed out. The GST paid by MSMEs after declining in FY21 has been rising since and now has crossed the pre-pandemic level of FY20, reflecting the financial resilience of small businesses and the effectiveness of the pre-emptive government intervention targeted towards MSMEs, it noted.
