Govt considers measures to boost MSMEs

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The central government is considering a slew of measures to boost Indian micro, small and medium enterprises (MSMEs), which include policy measures to integrate them with international markets, digital support for global competitiveness, ease of compliance on Goods and Services Tax (GST) laws, and providing low-cost credit, two officials said.

The measures are expected to be announced in the interim budget on February 1, the officials said, requesting anonymity. It is likely that the government may announce its intent in the interim budget, but details of the schemes could be unveiled later in the full budget for 2024-25 by July, one of them said.

“The high cost of credit is the single biggest roadblock in the growth of MSMEs, which could range between 15% and 28%, depending on the nature of financial institution. The Emergency Credit Line Guarantee Scheme (ECLGS) was good, but it helped a fraction of the 6.5 crore MSMEs as it supported only those who had existing loans. The cost of finance must be reduced if the sector has to compete in global markets though a targeted approach,” a second official said.

It is a work in progress, the officials said. “The aim is to make MSMEs globally competitive,” the first official said. Last week on Monday, addressing a seminar, finance minister Nirmala Sitharaman underscored the importance of integrating MSMEs with international trade for global prosperity.

“MSMEs account for 90% of businesses, 60% to 70% of employment and 50% of GDP worldwide. They play a key role in sustaining livelihoods, in particular among the working poor, women, youth, and groups in vulnerable situations,” she said. It is also part of the G20 Delhi Declaration.

Besides affordable credit facilities, ease of doing business is the second most important factor required to make the sector globally competitive, an expert said.

“Many MSMEs are facing issues with GST authorities, even as most of them are under the exempt category,” he said, requesting anonymity. “We are willing to come under the GST system, provided the government makes the GST system simpler. The government has promised that and we hope it walks the talk in the budget.”

The ECLGS was beneficial as a quick response to the pandemic, experts said. More focused approach and similar easy and economical credit was required to boost MSMEs. According to the National Credit Guarantee Trustee Company, the trusteeship manager of ECLGS, interest rates charged by banks are capped at 9.25% and 14% for non-banking financial companies.

ECLGS was one of the key components of the 20 lakh crore economic stimulus package under the Atmanirbhar Bharat Abhiyan launched immediately after the outbreak of the Covid-19 pandemic in May 2020. It offered additional working capital finance in the form of a term loan to MSMEs and professionals with an Initial corpus of 3 lakh crore, which was subsequently raised to 5 lakh crore.

The scheme was applicable to all loans sanctioned between May 23, 2020, to March 31, 2023. By January 31, guarantees amounting to 3.61 lakh crore was issued under ECLGS, benefiting 1.19 crore borrowers, the government had said in a statement.

The government has been focusing on MSME as one of the key drivers of the country’s economy immediately after the pandemic by redefining its scope, effective from July 1, 2020. Accordingly, a micro unit is an enterprise where investments in plant and machinery do not exceed 1 crore, and turnover does not exceed 5 crore.

In case of a small enterprise, investment in plant and machinery should not exceed 10 crore and turnover does not exceed 50 crore. Medium enterprises are those where investment in plant and machinery does not exceed 50 crore and turnover does not exceed 250 crore.

Source from: https://www.hindustantimes.com/india-news/govt-considers-measures-to-boost-msmes-101699900842016.html