The credit stimulus for MSMEs could have some unintended consequences
In the run-up to the general election next year, the Centre has announced an important credit stimulus(प्रोत्साहन/उत्तेजना)package for micro, small, and medium enterprises (MSMEs). Among(के बीच में) the many sops(रियायतों) doled(बांटना) out under the new scheme, Prime Minister Narendra Modi has promised the sanction(मंजूरी/प्रतिबंध) of business loans of up to ₹1 crore within a time frame of 59 minutes, in order to encourage(बढ़ावा देना/प्रोत्साहित करना) faster credit flow to MSMEs. These companies will also receive an interest subvention(आर्थिक सहायता/सहारा) of 2% under the scheme and support from public sector units, which will now be mandated(अनिवार्य/अधिदिष्ट) to make at least 25% of their overall purchases(खरीद) from MSMEs. It is worth noting that MSMEs, which account for 30% of India’s gross(कुल/सकल) domestic(घरेलू) product (GDP), were hit hard by the twin shocks of demonetisation(विमुद्रीकरण) and the implementation(परिपालन/अमल) of the Goods and Services Tax over the last couple of years. Further(आगे की/अधिक), in the aftermath of the IL&FS crisis(संकट), which has affected(प्रभावित) the amount of lending(उधार देना) done by non-banking financial companies to the MSME sector, the government would be looking at the scheme as a tool(उपकरण) to improve(सुधार) credit flow and the pace of job creation(निर्माण) in the economy. A study by officials of the Reserve Bank of India in August 2018, however, showed that growth in credit flow to MSMEs had recovered(वापिस पानेवाला/बरामद) to pre-demonetisation levels by the April-June quarter, just before the liquidity crisis.
The scheme has signs of state-led economic planning written all over it. The biggest risk of a credit stimulus is the misallocation of productive(उत्पादक) economic resources( संसाधन). Pumping extra credit into MSMEs now may well lead to a temporary(अस्थायी) boom(उछाल/तेजी ) and enable (सक्षम )a feel-good atmosphere(वातावरण/माहौल) in the run-up to elections, but it can lead to a painful bust when the stimulus ends some day. Another unintended(अनपेक्षित/अनायास) consequence(परिणाम/महत्त्व) is the likely deterioration(गिरावट/खराब होना) in credit standards as financial(वित्तीय) institutions(संस्थाए) are pushed to lend aggressively(आक्रामक) to MSMEs. Efforts to expedite(शीघ्र/जल्दी करना) business loan approvals may be welcome from the point of view of growth and job creation, but they rarely end well when motivated by political reasons. Conceptually(वैचारिक रूप से,), the Prime Minister’s latest credit scheme is no different from the MUDRA loan scheme, which has been troubled(तंग किया) by soaring(बढ़ोतरी) bad loans. In September, former RBI Governor Raghuram Rajan had warned that loans extended(विस्तारित) under the MUDRA scheme could turn out to be the source of the next financial crisis. Care needs to be taken to see that the new MSME loan scheme does not pose a similar risk in the future. Also, the demand that PSUs must procure a quarter of their inputs(आदानों) from MSMEs could breed furtherinefficiency(अक्षमता) in the economy. In all, the MSME loan scheme is yet another example of how bad economics can make for good politics.
Important Vocabulary
1.Sops(रियायतों)
Synonyms: absorb,, bribe, dip, douse, dunk
Antonyms: dehydrate, dry
2.Doled(बांटना)
Synonyms: deal, divide, dole, give, lot
Antonyms: collect, combine, gather, hold, join
3.Stimulus(प्रोत्साहन/उत्तेजना)
Synonyms: catalyst, encouragement, fillip, impetus, incentive
Antonyms: block, discouragement, hindrance, deterrent, tranquilizer
4.Subvention(आर्थिक सहायता/सहारा)
Synonyms: admission, allocation, allotment, alms, appropriation
Antonyms: denial, disadvantage, refusal, repudiation
5.Sanction(मंजूरी/प्रतिबंध)
Synonyms: approval, acquiescence, allowance, approbation, assent
Antonyms: denial, disagreement, disapproval, discouragement, opposition
6.Domestic(घरेलू
Synonyms: private, calm, family, home, pet
Antonyms: alien, business, foreign, industrial, office
7.Implementation(परिपालन/अमल)
Synonyms: application, discharge, employment, enjoyment, exertion
Antonyms: dissatisfaction, failure, idleness
8.Crisis(संकट
Synonyms: catastrophe, change, confrontation, crunch, deadlock
Antonyms: agreement, benefit, blessing, breakthrough, calm
9.Lending(उधार देना
Synonyms: add, afford, allow, contribute, extend
Antonyms: conceal, decrease, deny, disapprove, hold
10.Resources( संसाधन).
Synonyms: assets, backing, bankroll, basics, belongings
Antonyms: debt
11.Consequence(परिणाम/महत्त्व)
Synonyms: aftereffect, aftermath, effect, fallout, issue
Antonyms: cause, origin, source, beginning, commencement
12.Unintended(अनपेक्षित/अनायास)
Synonyms: accidental, inadvertent, unexpected, unforeseen, unplanned
Antonyms: expected, intentional, planned
13.Inputs(आदानों)
Synonyms: absorption, admission, input, profit
14.Soaring(बढ़ोतरी)
Synonyms: climbing, lofty, steep, towering, aerial
Antonyms: ground
15.Deterioration(गिरावट/खराब होना)
Synonyms: decline, degradation, depreciation, devaluation, disintegration
Antonyms: increase, ascent, development, growth, improvement
16.Expedite(शीघ्र/जल्दी करना
Synonyms: accelerate, assist, facilitate, hasten, promote
Antonyms: delay, hinder, hurt, retard, slow
