The Hindu Business Line : Change SME definition, remove reservation: Assocham report

"There has been a serious overlook over the SMEs in terms of policy and strategy. By linking the definition to employment rather than investment, there will be more manufacturing activity."

New Delhi , May 26

A more focused approach towards encouraging small and medium enterprises, easy exit for loss-making units, special thrust to consumer goods, real estate and retail industry and changes in labour laws could help achieve a 12 per cent manufacturing growth, according to the Associated Chambers of Commerce and Industry of India (Assocham).

Responding to the Finance Minister, Mr P. Chidambaram's call that industry should spell out the policy issues that stood between them and a 12 per cent manufacturing growth, Assocham has released a report that suggests certain steps to boost manufacturing growth.

Special labour policy

As regards the SMEs, the report, prepared by the Assocham expert committee headed by Mr T.K. Bhaumik, recommended that the small-scale sector definition be linked to employment and not to investment as was the case now. Moreover, there should be a special labour policy for SMEs.

"There has been a serious overlook over the SMEs in terms of policy and strategy. By linking the definition to employment rather than investment, there will be more manufacturing activity," Mr Bhaumik told reporters here today after releasing the report.

Other suggestions

The report also suggests removal of reservation and replacing it by a policy that enables SMEs to withstand and sustain market shocks and commercial risks.

On consumer goods, the report suggests that this industry could be made the growth leader and would help propel manufacturing in the country. "Given the size of the country's middle class and its steady growth, this sector can be the driver of future growth," Mr Bhaumik said. Assocham is of the view that this sector can sustain 20 per cent growth.

Changes in three labour laws — Industrial Disputes Act, Contract Labour (regulation and abolition) Act and Trade Union Act - have also been suggested for employment generation, investment and productivity growth.

Fiscal policy

On the fiscal policy front, the Assocham report recommended that income up to Rs 2 lakh be exempted for the purpose of taxable income to improve consumer spending and boost domestic demand. It also called for a single rate of customs duty. "By a single rate, we do not mean single rate across the board for all products. What it means is that for a product, there should be only one rate and not multiple rates," Mr Bhaumik said.

On corporate tax, the Assocham report has said that the tax rate should be brought down to 30 per cent, including surcharges. Moreover, it also recommends removal of all exemptions.

Besides suggesting removal of central sales tax (CST) altogether, the report recommends introduction of goods and services tax (GST) at the earliest, without waiting till 2010.

A suggestion has also been made to ensure a simplified countrywide uniform tax across all States without any distortion.

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