02 Aug Self-Reliant India (SRI) Fund
This article covers “Daily Current Affairs” and the topic details “Self-Reliant India (SRI) Fund”. The topic “Self-Reliant India (SRI) Fund” has relevance in the Economy section of the UPSC CSE exam.
For Prelims:
About Self-Reliant India (SRI) Fund?
Status of the MSME Sector in India?
For Mains:
GS 3: Economy
Government Initiatives for the MSME Sector?
Way Forward?
Why in the news:
The Self-Reliant India (SRI) Fund, amounting to Rs. 50,000 crores and overseen by the State Bank of India’s private equity arm SBICAP Ventures (SVL), has made investments totaling Rs. 4,885 crores in Micro, Small, and Medium Enterprises (MSMEs) to date.
Self-Reliant India (SRI) Fund:
- The SRI Fund is a part of the Atmanirbhar Bharat package announced by the Indian government.
- It involves an allocation of Rs. 50,000 crores for equity infusion in Micro, Small, and Medium Enterprises (MSMEs).
- The SRI Fund functions using a two-tier structure involving a mother-fund and daughter-fund arrangement for making equity or quasi-equity investments.
- The National Small Industries Corporation (NSIC) Venture Capital Fund Limited (NVCFL) is designated as the Mother Fund for implementing the SRI Fund.
- It is registered as a Category-II Alternative Investment Fund (AIF) with SEBI (Securities and Exchange Board of India).
- Objectives of the SRI Fund include providing equity funding to viable and high-potential MSMEs, fostering their growth, promoting innovation, entrepreneurship, and competitiveness, and creating an environment conducive to technological upgradation and research.
Composition of the SRI Fund:
- The SRI Fund comprises Rs. 10,000 Crore from the Government of India for equity infusion in select MSMEs.
- Additionally, Rs. 40,000 Crore is sourced through Private Equity (PE) and Venture Capital (VC) funds, leveraging private sector expertise and investment.
Status of the MSME Sector in India:
- The MSME sector contributes around 33% of India’s total GDP and is predicted to contribute USD 1 trillion to India’s total exports by 2028.
- It provides about 110 million jobs, accounting for 22-23% of total employment in India.
- The sector promotes entrepreneurship and innovation, fosters rural development, and supports inclusive growth and poverty reduction.
- Challenges faced by the MSME sector include outdated infrastructure, limited access to modern technology, complex regulatory environment, inadequate working capital management, and vulnerability to economic fluctuations.
Government Initiatives for the MSME Sector:
- MSME Champions Scheme: Comprising MSME-Sustainable (ZED), MSME-Competitive (Lean), and MSME-Innovative, this scheme provides financial assistance to enhance MSME competitiveness and innovation capabilities.
- Infusion in Credit Guarantee Fund: The government announced an infusion of Rs. 9,000 crore in the Credit Guarantee Fund Trust for Micro & Small Enterprises.
- Raising and Accelerating MSME Performance (RAMP): This initiative aims to enhance the institutions and governance of MSME programs at both the central and state levels. This initiative seeks to strengthen the existing MSME ecosystem by implementing measures that promote better governance and efficiency in supporting the growth and development of Micro, Small, and Medium Enterprises (MSMEs).
- Amendment in Income Tax Act: The Finance Act 2023 amended Section 43B of the Income Tax Act, 1961, to offer more favorable tax provisions for MSMEs.
Way Forward for the MSME Sector:
- Improving Ease of Doing Business: Continuously working towards reducing bureaucratic red tape and simplifying regulatory compliance for MSMEs.
- Mobile Innovation Labs: Setting up mobile innovation labs in rural areas to provide access to cutting-edge technologies, training, and mentorship to bridge the technology gap.
- Government-Private Sector Co-Innovation Funds: Creating co-investment funds where the government partners with private sector companies to invest in promising MSME innovations.
- Innovation Impact Assessment: Developing a standardized impact assessment framework to measure the societal and environmental benefits of MSME innovations and provide additional recognition and support to businesses demonstrating positive impact.
- Access to Finance: Facilitate easier access to formal credit and financial services for MSMEs. This can be achieved through the expansion of credit guarantee schemes, lowering collateral requirements, and promoting digital lending platforms.
- Market Access: Create platforms and opportunities for MSMEs to access larger markets, both domestically and internationally. This can involve supporting e-commerce platforms and facilitating participation in trade fairs and exhibitions.
- Ease of Doing Business: Continue to streamline regulations and compliance processes to reduce the burden on MSMEs. Simplified tax structures, faster licensing procedures, and single-window clearances can improve the ease of doing business.
- Cluster Development: Foster the development of MSME clusters or industrial parks, where similar businesses can co-locate and benefit from shared infrastructure, resources, and knowledge exchange.
- Supply Chain Integration: Encourage MSMEs to become a part of larger supply chains by partnering with larger companies and multinational corporations. This can provide access to steady demand and stable revenue streams.
According to SEBI (AIF) Regulations, 2012, Alternative Investment Funds (AIFs) are required to seek registration in one of the following three categories:
| Category | Type of AIF | Investment Focus | Incentives/Concessions from Government/Regulators |
| Category I | Start-ups, SMEs, Government-approved sectors | Economically and socially viable sectors | May receive incentives from the government |
| Category II | Private Equity Funds, Debt Funds | No specific incentives or concessions | No incentives or concessions |
| Category III | Hedge Funds, Short-term return-focused funds | Short-term returns, Open-ended funds | No incentives or concessions |
Q.1 Consider the following statements
- All loans provided to Micro, Small, and Medium Enterprises (MSMEs) qualify for the priority sector.
- The MSME sector contributes approximately 40% to India’s exports market.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
ANSWER: A
Q.2 Consider the following statements regarding MSME sector in India:
- The turnover criteria for the medium-sized enterprise is up to Rs. 50 crore.
- MSMEs contribute approximately 8% of India’s GDP.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
ANSWER: A
Q.3 Discuss the major challenges faced by the MSME sector in India and suggest policy measures that the government can undertake to address these challenges and promote the sustainable growth of MSMEs.
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