How few simple measures can help MSME in Covid driven Recession
NewsBharati 28-Jun-2021
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India has an inherent culture of entrepreneurship. Number of per capita shops and household to small industry is highest in the world. We have witnessed Indian economy boom from 1991 after removal of license quota raj. MSMEs (Medium Small and Micro Enterprises) are the only prudent way of migrating our country from an agricultural country to a manufacturing hub. The wealth created by MSMEs has a better distribution curve within society. There are 63 million MSMEs in India, employing close to 120 million individuals. It contributes about 29% in GDP and 40% in direct exports.
All though everyone in charge of running the country is aware of the importance of MSME, in developing nation’s economy, however, MSMEs seem to get step brotherly treatment vis a vis big corporates. The Current regime in India in last 7 years of its tenure has shown not only intent but a bit of content to address MSME issues. Among slew of the measures taken, the most noteworthy are GST and revision of MSMEs definition. However a lot needs to be done.
The first wave of corona pandemic hit MSMEs very badly and by the time things started to move, the second wave has hit us hard. The impact of the second wave has not only hit MSME hard economically, but weakened its morale too. Based on my personal experience as a third generation entrepreneur, a career spanning 25 years and various discussions I had with my fellow entrepreneurs, I have come up with few suggestions that might bring a sea change in MSMEs fate and will achieve much for them, the nation and contribute towards a strong self-reliant India.
To start with, MSME ministry is headed by the most efficient and dynamic minister of India Shri Nitin ji Gadkari. However, it his attention is taken up by infrastructure development that he is developing at massive velocity. A full time minister is a dire requirement as the starting point.
Step brother treatment to MSMEs is evident from the Budget allocation. Although it has been of doubled from 7500 crore to close to 16000 crore this year, it’s too less for the sector that contributes, in direct and indirect tax collection approximately 6 to 7 lakh crore. Even 10% of allocation of this revenue in the budget for MSME development can give MSME ministry the room to widen the scope of various schemes.
A lot is spoken about GST reforms. It just needs the same political will to do it that was shown in implementing it. The major reforms needed are –
1. Just three slabs of 0 , 8% and 18%
2. If this 18% is reduced to 16% for the time being, it can increase the fluidity in market tremendously.
3. A Hard working nation builder who has no escape like the big absconders shouldn’t be hounded with penal provisions.
4. Lastly, let’s make it SARAL - easy.
MSMEs have no rivalry with their big brother corporates. However, the tax concession given to them have not yielded the results envisaged by the finance ministry. If MSMEs are not given the arms-length treatment being given now, they can yield better results, result in better impact on the society.
What Gangotri is for Ganga, banks are for MSMEs. Their list of demand can be as long as the menu card of a multi cuisine restaurant. But, for now if few are met now, it will be a good start -
1. Primary requirement is to increase the tenure of term loans, specially for infrastructure assets like plant and building.
2. NPA norms should be revised from 90 days to minimum of 180 days. Even large corporates and PSUs don’t make payment in stipulated time to their poor MSME cousins.
The first one will bring in liquidity and second one will give a lot of mental peace for small businesses. The scheme of without collateral loan should be made more effective and disbursement should be 100% of its allocation. Currently, the disbursement is way below the claimed targets. While larger NPAs are created by large corporates, it is MSME that bears the brunt of bank manager’s frustration with large corporates.
Our ancient history is full of the stories where one is eligible for two boons in one go. If I were to be asked to choose only two my requests, it will be to allocate minimum of 75000 crore for MSME sector in budget and make GST Saral.
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