Needed, a comprehensive national MSME policy

PK Jain | Updated on January 16, 2018 Published on December 28, 2016

The MSME sector contributes 8 per cent to the GDP, whilst employing more than 80 million people.

Growth in micro and small enterprises has been consistent over the past five decades due to a combination of government support, implementation of technological enhancements, and support by the banking sector.

In 2016, initiatives have been taken by the Centre as well as State governments to improve ‘ease of doing business’ and to make Micro, Small and Medium Enterprises (MSMEs) more globally competitive – such as the Udyog Aadhar Memorandum framework for revival and rehabilitation of MSMEs, which enables banks/creditors to identify enterprises in the stage of initial stress and thus take corrective action, and A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE), among others.

Impact of demonetisation

The historic paradigm change through demonetisation, conceived by the Prime Minister, is strongly expected to have a long-lasting favourable impact. But, at the same time, there is a mammoth task ahead for the Prime Minister to make this a success.

In case of SMEs, most will be unsure of payments coming from customers for some time. Currently, businesses and MSMEs dependent on cash for daily operations have been hit badly and though the Centre increased withdrawal caps, it will still be a few months before the situation stabilises.

The Centre should immediately act to enhance awareness amongst Indian SMEs about the importance and benefits of cashless transactions and digital payments, and in addition to that, deliberate on the role trade associations and other SME stakeholders could play to assist in this transition.

Hopefully, the Centre will soon take measures to restart the money wheel in the market again. This could happen in several forms — early announcement of GST and Banking Transaction Tax, elimination or drastic reduction of service tax and VAT until GST is introduced, or something else. This will encourage people to spend without having the fear of tax.

Suggestions for 2017

The Centre must notify the Micro Small and Medium Enterprises Development (Amendment) Bill, 2015, which seeks to enhance the existing limit for investment in plant and machinery, considering inflation and the dynamic market situation. At the moment, there is no integrated approach for the development of MSMEs despite the fact that it accounts for 40 per cent of India’s manufacturing and 45 per cent of exports. Therefore, the Centre should come out with one comprehensive policy.

Several areas of concern relating to the GST law and its implementation, must be addressed. It is equally important to provide special incentives for the promotion of export, such as freight subsidy and marketing support.

The writer is Chairman, ASSOCHAM National Council on SMEs

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Published on December 28, 2016
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