Disbursement to MSME sector increases post GST

Disbursement of loans to Micro & Small Enterprises (MSEs) has increased significantly after implementation of GST. The credit to this sector in the 15-month period post-GST increased 5 times to Rs. 1.23 lakh crore, compared to Rs. 25,700 crore during the corresponding pre-GST period, according to a State Bank of India research report.

The jump in credit to MSE sector bodes well regarding the formalisation of the Indian economy and, hence, the ensuing benefits, said the bank’s Ecowrap report.

The report observed that the declaration in credit during the pre-GST period was partly due to the overall slowdown in economic activity, rising NPAs (non-performing assets), and reclassification of food and agro-processing units from the MSME (micro, small and medium enterprise) category to agriculture sector (as per the revised priority sector lending guidelines, 2015).

“According to International Finance Corporation (IFC) estimates, the potential demand for India’s MSME finance is about $370 billion, against the current credit supply of $139 billion, resulting in a finance gap of $230 billion. Hence, much needs to be done,” the report said.

Even as credit growth still remains in comfort territory, despite slowing down, the report said there is more concern over the slowdown in growth.

The report has cut its FY19 GDP forecast for FY19 to 7.2 per cent from 7.4 per cent earlier.