These industrial areas would act like industrial parks specifically for the small businesses, said two people aware of the development.
The Centre would provide most of the financial support needed for setting up and upgrading the industrial areas, said one of the two people mentioned above. Apart from getting support from states, and allowing a state implementing agency to set up the projects, multilateral lenders such as the Asian Development Bank and International Financial Corporation of the World Bank would also be asked to participate in financing these projects.
“The scheme would focus on both brownfield and greenfield projects and aims at getting more and more MSMEs under the ambit of cluster-based operations," said the person.
The second official said the proposal is in line with efforts to make Indian MSMEs more competitive. “Efforts would also be made to improve the market access of small businesses which are in these industrial areas. It would be done through a digital business match-making platform to showcase and integrate India MSMEs with the national and global supply chain," this official said.
With a focus on increasing the adoption of technology by MSMEs, special purpose vehicles (SPV) would be formed by bringing MSMEs together, which would be allowed to borrow from banks as a single borrower and further devolve the loan among their members.
To be sure, the MSME ministry has been running a Micro and Small Enterprises Cluster Development Programme (MSE-CDP) since 2011-12. But progress under the scheme has not lived up to expectations and the new scheme may be an effort to overhaul the existing one.
A draft policy for MSMEs, released in March last year, also mentions the need for financing a cluster development approach with special incentives.
“Create MSME clusters to collaborate with companies offering innovation infrastructure, R&D institutions and universities that specialize in a specific industry or knowledge area," the draft policy said. Queries sent to the ministries of finance and MSME remained unanswered till press time.
“Under the current scheme, support is given for common infrastructure like testing labs and R&D centres, but some of the basic requirements like road and electricity are kept out of the scheme. These should be brought under the ambit of the scheme," said Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises (FISME).
The focus on MSMEs comes against the backdrop of these businesses being hit by high inflation and input costs along with a slowdown in exports and prospects of a global recession. Further, the smallest of these businesses are still trying to recover from the impact of the pandemic.
Amid the pandemic, the government has taken measures focused at MSMEs including the widening of the definition of MSMEs to allow more businesses to avail the support given to the sector. In 2020, amid the first wave of the pandemic, the Centre launched the Emergency Credit Line Guarantee Scheme (ECLGS) to provide loans to small businesses.
