Governance and Policy Transformations in Central Banking

Abstract

The MSME sector, which employs over 11.10 crore workers in non-agricultural activities and contributes to approximately 50% of India's exports, is the backbone of the economy. Unfortunately, the ongoing health emergency has created a distressing situation for these units, as the severely constrained demand has led to a significant decline in their revenue. This situation is further exacerbated by the pandemic, which has created a myriad of problems for the sensitive MSME sector, as their liquidity depends on the daily demand for their product, and they lack significant cash reserves. This is putting the sustainability of MSMEs at stake, which is concerning since they contribute approximately 30-35% to the GDP. The current scenario presents a very gloomy picture of the prospects of India's economic development. This chapter discusses the nonperforming assets (NPAs) and their impact on the sustainability of the MSME sector. This chapter also discusses the causes and effects NPAs on the sustainability of the MSME sector.