MSME credit growth back at pre-note ban levels: RBI study

• The flow of bank credit to micro, small and medium enterprises that took a hit in the aftermath of demonetization seems to have picked up again, a study by officials at the Reserve Bank of India showed.

• The growth of bank credit to the MSME sector, which had started decelerating even before demonetization and fell significantly and turned negative in the wake of the note ban, has rebounded.

• Data shows that during the April-June quarter, bank credit to MSMEs increased on average by 8.5% year-on-year, mirroring the level of growth during April-June 2015. Credit to micro and small enterprises grew at an even healthier rate.

• In contrast, while GST implementation does not seem to have had any significant impact on credit, it adversely impacted MSME exports.

• The MSME sector comprises more than 63 million units and employs about 111 million people. The share MSMEs in GDP is about 30%, with the sector accounting for about 45% of manufacturing outputs and about 40% of India’s total exports.

• The sector faces operational problems due to its size and nature of the business, and is, therefore, relatively more susceptible to various shocks to the economy. MSMEs largely operate in the informal sector and comprise a large number of micro-enterprises and daily wage earners.

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