Pandemic and the Credit-based Stimulus Package for the MSME Sector

The Covid-19 pandemic has led to livelihood problems, especially for the self-employed, who have started working at a suboptimal level. In this context, the peri-urban sector of the economy is of considerable importance, as the lockdown due to Covid-19 resulted in a large return migration, with some people still reluctant to return and looking for work in their local regions (both rural and peripheral). Peri-urban regions are also more quickly affected by a shortage of demand.

To address the economic downturn during the pandemic, the Indian government has initiated several measures that focus on credit-related initiatives. Some of the credit-related programs relevant to the rural non-farm sector are: 3,000,000 million rupee collateral-free loans for small businesses, government guarantees for loans, etc. In addition, in 2015, the government introduced a large credit program - MUDRA Yojana - aimed at creating large-scale self-employment (where wage employment could be a by-product).

It is therefore important to examine the performance of some of these programs in the selected peri-urban areas of Bengaluru by interviewing some of the small manufacturing or service enterprises.

1. Accessibility

• To understand the problems faced by potential entrepreneurs in accessing loans

2. Sustainability

• To understand whether the schemes are sustainable (for the financial institutions) in terms of rolling capital or is creating NPAs

3. Impact Assessment

• Whether credit support has helped the households combat the negative impacts of Covid-19 in a sustainable manner

• Publications:

Rajeev, Meenakshi and Christoph Scherrer 2021: Smallholders’ Challenges: Realizing Peri-Urban Opportunities in Bangalore, in: Sustainability 2021, 13, 10160. https://doi.org/10.3390/su131810160