Print Friendly, PDF & Email

Enumerate the provisions for the growth of MSME sector in India in the union budget 2022-23. Examine the potential of Emergency Credit Line Guarantee Scheme (ECLGS) in ensuring additional working capital requirements for MSME’s. (250 words)

10.Enumerate the provisions for the growth of MSME sector in India in the union budget 2022-23. Examine the potential of Emergency Credit Line Guarantee Scheme (ECLGS) in ensuring additional working capital requirements for MSME’s. (250 words)



The Union budget 2022-23 strives to enact economic reforms for the country that is recovering from the pandemic and pave the pathway for its robust rise in the coming years. It speaks of an outlook for India@100 in preparation for a post-Covid world order. Union budget has demonstrated commitment towards supply-side reforms. It strives to initiate a dynamic growth engine that shall sustain itself. The Budget proposals on capital expenditure, MSME sector, and digital banking will boost growth and promote job creation.


Provisions for growth of MSME’s in Budget 2022-23

  • Budget continues to provide much-needed relief to the COVID-hit MSME sector. The revival of MSMEs is critical both from growth and employment perspective, and these measures are geared towards building a vibrant MSME sector.
  • There are a host of measures aimed at small business, ranging from credit guarantee schemes to improving the ease of doing business, that help MSMEs navigate economic uncertainty.
  • India’s MSME sector will be greatly benefited by the reservation of 68 per cent of the Defence Capital Budget for the domestic industry. Rs 7.5 lakh crore worth of public investment will give a new push to the economy and create new opportunities for small and other industries.
  • A Raising and Accelerating MSME Performance (RAMP) programme will be rolled out with a Rs 6,000 crore outlay spread over 5 years for MSMEs.
  • The Emergency Credit Line Guarantee Scheme (ECLGS) that provided much needed additional credit to over 1.3 crore MSMEs will be extended till March 2023 with its guarantee cover expanded by Rs 50,000 crore to Rs 5 lakh crore.

About Emergency Credit Line Guarantee Scheme (ECLGS)

The scheme was launched as part of the Aatmanirbhar Bharat Abhiyan package announced in May 2020 to mitigate the distress caused by coronavirus-induced lockdown, by providing credit to different sectors, especially Micro, Small and Medium Enterprises (MSMEs).

  • 100% guarantee coverage is being provided by the National Credit Guarantee Trustee Company, whereas Banks and Non Banking Financial Companies (NBFCs) provide loans.
  • The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
  • No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
  • Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs

Potential of Emergency Credit Line Guarantee Scheme

The Emergency Credit Line Guarantee Scheme (ECLGS) will be extended to cover the next fiscal as well, with expanded guarantee cover of Rs 5 lakh crore.

  • Under ECLGS, which is for helping companies tide over liquidity crunch resulting from Covid-19 curbs, banks provide additional loans to existing borrowers without asking for extra collateral.
    • To encourage banks, these loans are fully guaranteed by the government against credit losses.
    • This scheme will be key to ensure that MSMEs impacted by intermittent lockdowns in states get funding to stay afloat.
  • The scheme is expected to provide credit to the sector at a low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.
  • By supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.
  • Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans.
  • Companies from hospitality, travel and tourism as well as leisure and sporting sectors are expected to benefit from the relaxation in the scheme.
    • Hotels, restaurants, canteens, caterers, marriage halls, tour operators, as well as amusement parks and theatres can avail the facility.


The success of the budget can be assessed post-facto once the schemes kick in and take off in a large-scale manner. It has been called as the AatmanirbharBharatKaBudget, which brings with it new energy and strength to our development trajectory, especially at a time when we are courageously fighting a once-in-a-lifetime global pandemic. This Budget is supposed to bring more infra, more investment, more growth and more jobs taking India to newer heights.