How Will India’s New Schemes RAMP and CBFTE Benefit Small Businesses?
India recently launched two new schemes – RAMP and CBFTE – to support micro, small, and medium enterprises (MSMEs). Both schemes are part of the ‘Udyami Bharat’ initiative, which will empower MSMEs in India. The RAMP scheme has an outlay of INR 60 billion and will support market access and finance availability for MSMEs. The CBFTE scheme aims to ease the export process for first-time exporters in every possible way – be it monetary support or procedural assistance.
On June 30, 2022, India’s Prime Minister Narendra Modi launched two new schemes for supporting micro, small, and medium enterprises (MSME) —‘Raising and Accelerating MSME Performance’ (RAMP) and ‘Capacity Building of First-Time MSME Exporters’ (CBFTE). The two schemes are launched as components of the government’s ‘Udyami Bharat’ program, which aims to empower MSMEs. RAMP and CBFTE are also expected to amplify India’s ‘self-reliant economy’ drive (‘Atmanirbhar Bharat Abhiyan’).
Other schemes under the Udyami Bharat program include MUDRA Yojana, Emergency Credit Line Guarantee Scheme, Scheme of Fund for Regeneration of Traditional Industries (SFURTI), etc.
At the end of financial year (FY) 2021-22, there were over 7.9 million MSMEs in India, contributing approximately 30 percent to the gross domestic product (GDP) and 48 percent to the country’s overall exports. In FY22, India saw a strong rebound in exports, soaring to a record high of US$418 billion, driven mainly by a surge in demand for products like petroleum, cotton yarn, textiles, chemicals, and engineering goods.
What is the RAMP scheme and how will it assist MSMEs?
Designed with an outlay of INR 60.62 billion, the RAMP scheme is a World Bank-assisted central sector program, which was first announced in 2020 to support COVID-19-affected MSMEs in their business recovery.
RAMP will be operational for a five-year period, starting from FY 2022-23. Out of the total INR 60 billion, INR 37.50 billion will be loaned by the World Bank and the remaining will be contributed by the Indian federal government.
Although the scheme will directly and indirectly benefit all MSME units in India, it will specifically target a total of 555,000 MSMEs for enhanced performance. In addition, it intends to target service sectors.
The RAMP scheme would function as a:
- policy provider through the enhanced capacity for evidence-based policy and program design to enable the delivery of more effective and cost-efficient MSME interventions to improve competitiveness and business sustainability.
- knowledge provider through benchmarking, sharing, and demonstrating best practices and success stories by leveraging international experiences.
- technology provider to provide MSMEs with access to high-end technology like artificial intelligence (AI), data analytics, Internet of things (IoT), machine learning (ML), etc.
How will the RAMP scheme be implemented?
The primary objectives of the RAMP scheme are:
- Strengthening institutions and governance of the MSME programs.
- Support for market access, firm capabilities, and expanding access to finance.
The government’s allocated funds for RAMP go into the MSME Ministry’s budget for disbursement linked indicators (DLIs) – that is, to support ongoing MSME programs. The disbursement of funds from the World Bank for RAMP would fulfill the following DLIs:
- Implementation of the National MSME Reform Agenda.
- Acceleration of federal and state governments’ collaboration in the MSME sector.
- Enhancing the effectiveness of the Technology Upgradation Scheme (CLCS-TUS).
- Strengthening the receivable financing market for MSMEs.
- Enhancing the effectiveness of the ‘Credit Guarantee Trust for Micro and Small Enterprises’ (CGTMSE) and ‘Greening and Gender’ delivery. The greening and gender drive aims to aid the transition of MSMEs towards a clean and inclusive future.
- Reducing the incidence of delayed payments.
The implementation of the RAMP scheme includes preparation of strategic investment plans (SIPs), in which all states and union territories will be invited. The SIPs would include an outreach plan for identification and mobilization of MSMEs under RAMP, identify key constraints and gaps, set milestones, and estimate the required budgets for interventions in priority sectors like renewable energy, rural and non-farm business, wholesale and retail trade, village and cottage industries, women enterprises, etc.
For monitoring and policy overview, an apex National MSME Council would conduct overall monitoring and policy review of the scheme. This Council will be headed by the federal minister for MSMEs and will include representation from various other ministries. Additionally, for day-to-day implementation, there will be program management units at both the federal and state government levels, comprising of professionals and experts to aid in implementing, monitoring, and evaluating the RAMP program.
What are the benefits of the RAMP scheme?
The RAMP scheme is expected to play a larger role in the formalization of MSMEs.
Core benefits of the RAMP scheme include improvement in capacity building, handholding, skill development, quality enrichment, technological upgradation, digitization, outreach, and marketing promotion. Further, the scheme will assist in achieving self-reliance by encouraging innovation and enhancement in industry standards, practices, and providing necessary technological inputs to the MSMEs.
What is the CBFTE scheme?
The CBFTE scheme has been launched as a subcomponent of the International Cooperation scheme to ease the export process for first-time exporters, be it in terms of monetary support or procedural support. Its primary objective is to encourage MSMEs to offer products and services of international standards for the global market. The move is intended to help MSMEs improve their participation in the global value chain and realize export potential.
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