Dynamism in the economy comes from small-scale units becoming big and support should be aimed at such growth, said Arvind Subramanian, Chief Economic Advisor, Government of India.

Since the 1950s, regulations such as the Monopolies and Restrictive Trade Practices had been based on a ‘phobia of big guys’. Also, small-scale reservations have not helped anyone. But such impediment to growth are ‘coming back to haunt us’, he said.

Even exports happen by big guys who have grown up from small scale, he said in an interaction with industry representatives.

Responding to a question from TT Ashok, Managing Director, Taylor Rubber, on the dearth of credit flow to MSMEs, high cost of funds and harassment under the SARFAESI Act, Subramanian said macro economic conditions necessitate caution against easing monetary policy. But in the last 12 – 18 months cost of capital has come down. Also, the government is looking at measures to increase flow of finance to MSMEs and others.

GST and the transparency in transactions will support MSMEs to demonstrate their track record and enable access to funds in the near future, he said.

The challenge of twin balance sheet constrain in banks has resulted in clogging fund flow as much to MSMEs as to others. Once this issue is tackled, it will support fund flows to some extent, he felt.

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