A Lesser Known Impact: Credit Flow To Micro, Small Enterprises Saw Fivefold Increase After GST, Claims Report

Credit growth to Micro & Small Enterprises (MSEs) has increased five times after the implementation of Goods and Services Tax (GST), The Hindu Business Line has reported. This trend is likely to help in formalisation of Indian economy.

During the 15-month period post-GST, the credit flow to the MSE sector increased to Rs 1.23 lakh crore, compared to Rs 25,700 crore during the corresponding pre-GST period. This data was revealed in a State Bank of India (SBI) research report.

“According to International Finance Corporation (IFC) estimates, the potential demand for India’s MSME finance is about $370 billion, against the current credit supply of $139 billion, resulting in a finance gap of $230 billion. Hence, much needs to be done,” said the report.

The SBI report also said that the slowdown in credit during the pre-GST period was partly due to the overall slowdown in economic activity. Rising non-performing assets (NPA), and reclassification of food and agro-processing units from the micro, small and medium enterprise (MSME) category to agriculture sector had also played a role in the lower credit flow to MSEs during the pre-GST period.