The manufacturing sector and micro, small and medium enterprises (MSME) are spearheading economic growth in the country after the outbreak of Covid-19 while many contact-intensive services sub-sectors remain severely affected by the crisis, RBI Governor Shaktikanta Das said on Thursday.

However, the recent government initiatives under AatmaNirbhar Bharat Abhiyaan and Union Budget 2021-22 towards developing a vibrant manufacturing sector and infrastructure acknowledges strong linkages they have with rest of the sectors, he said in his keynote address at the Bombay Chamber of Commerce and Industry.

Das said the Production Linked Incentive (PLI) Scheme aims to make India an integral part of the global value chain. "This along with reforms in labour market can go a long way in propelling growth to an elevated trajectory for the manufacturing sector and reap its employment potential."

At the same time, MSME sector has emerged as the growth engine of economy with a vast network of 6.33 crore enterprises contributing 30 per cent to nominal GDP and around 48 per cent to exports. The sector employs about 11 crore people, second only to agriculture.

Das said the sector was rendered especially vulnerable by the pandemic, necessitating concerted efforts to combat the stress and focus on revival of the sector.

The government introduced two major schemes: the Emergency Credit Line Guarantee Scheme (ECLGS) and the Credit Guarantee Scheme for Subordinate Debt (CGSSD).

These have been duly supported by various monetary and regulatory measures by the RBI in the form of interest rate cuts, higher structural and durable liquidity, moratorium on debt servicing, asset classification standstill, loan restructuring package and CRR exemptions on credit disbursed to new MSME borrowers.

"These measures will not only help in ameliorating stress in the sector but also open new opportunities," said Das. "Going forward, the RBI stands ready to support the Small Industries Development Bank of India (SIDBI) for greater credit penetration to the MSME sector."

He said digital capabilities have the potential to raise productivity in agriculture, manufacturing and businesses as well as improve the delivery of public services like healthcare and education.

"In the financial sector, this could lead to higher financial inclusion, lesser information asymmetry and reduced credit risk."