The pandemic’s economic fallout severely impacted small businesses, triggering financial disruptions for many. In response, the Government of India, in collaboration with the World Bank, introduced the Raising and Accelerating MSME Performance (RAMP) programme. Let’s delve into the details of this initiative and its potential to benefit India’s MSMEs.
Understanding RAMP Programme:
RAMP aims to provide financial support to COVID-affected MSMEs. This project, spanning five years from FY 2022 to FY 2026, is a partnership with the World Bank. The scheme was initiated following a report by the UK Sinha Committee in June 2019, highlighting the potential financial reforms that could benefit MSMEs. The World Bank’s contribution of Rs. 3,750 crore under the Credit Linked Capital Subsidy and Technology Upgradation Scheme forms a significant part of the total estimated cost of Rs. 6,062.45 crore.
The Rationale Behind RAMP:
Addressing the reality that 40% of India’s 58 million MSMEs lack access to formal credit, RAMP focuses on enhancing the sector’s productivity and competitiveness post-COVID. Following the success of the World Bank’s previous initiative, the Emergency Response Program, which injected around Rs. 5,600 crore, RAMP marks the second collaboration between the international bank and the Indian government.
Anticipated Benefits for MSMEs:
The programme will roll out in five states—Tamil Nadu, Punjab, Gujarat, Maharashtra, and Rajasthan—housing 54% of India’s MSMEs. RAMP aims to bolster credit and liquidity for small businesses by incentivizing banks and non-banking financial companies (NBFCs) to extend loans to MSMEs. The prior programme aided approximately 50 lakh companies by June 4, 2021, and the second endeavour aspires to assist even more.
Around 1.5 million MSMEs are expected to benefit from RAMP, fostering employment, productivity, and skill development in the industry. Access to finances can empower MSMEs to focus on critical aspects like hiring, product innovation, and sustainable business practices.
Moreover, RAMP shines a spotlight on MSME clusters—concentrated groups of enterprises operating in the same sector and geographic area. These clusters, largely untapped in India, hold potential to significantly boost the sector’s revenue.
The World Bank’s Rs. 3,750-crore loan, with an 18.5-year maturity period (including a 5.5-year grace period), provides a promising opportunity for India’s MSMEs to recuperate from pandemic-induced setbacks and chart a path towards robust growth over the next five years.