Chennai: Prime Minister Modi announced Rs one crore loan for micro, small and medium enterprises (MSME) in record 59 minutes including major steps to boost the sector that is a major employment creator in the country.
Modi made the announcement at the launching ceremony of Government’s Support and Outreach Initiative for MSME. The sector also makes a significant contribution to the overall growth of the country’s economy.
The decisions include providing discounts on new loans for GST-registered businesses, increasing mandatory purchases of products from MSMEs by State-run companies, making labour-law compliances easier, reducing government inspections of factories and simplifying environmental protection norms.
To counter GST backlash?
The move comes after a unified Goods and Services Tax (GST), launched more than a year ago, drove many small enterprises out of business and put hundreds of thousands out of work.
A survey by the All India Trade Union Congress in July found that a fifth of India’s 63 million small businesses had seen a 20 per cent fall in profits since the GST rollout.
Thus, the announcement is seen as a counter to overtures by the main opposition to small businesses, which account for 32 per cent of the economy and employ 111 million people.
More pressure on banks
It must be noted that post-IL&FS NBFC crisis – IL&FS represents 16 per cent of all bank lending to NBFCs, thus the slowing of bank credit to MSMEs. The reason experts state that the package pays special attention to credit access.
However, experts worry that the package will end up putting greater pressure on bankers to lend more to MSMEs, especially since NBFC credit has dried up.
Many argue that the reason for government to intervene and get the credit supplies growing is because of the outstanding bank credit to MSMEs coming down to Rs 4.69 lakh crore at the end of September from Rs 4.73 lakh crore at the same time in 2016.
The reason for lending to remain flat is that banks are not equipped in the best wat to lend to the sector, experts state. The reason is that the amount of time required to service an MSME loan is the same as a larger loan and hence banks concentrate on the larger ones naturally. It is also seen that NBFCs and MFIs are better suited for such loans since they are much closer to their customers.
What does the industry say?
Meanwhile, industry bodies have hailed the series of measures announced by the Prime Minister for supporting MSMEs, saying it would ensure easier access to credit for the sector and address its problems.
Assocham secretary general, Uday Kumar Varma, said in New Delhi yesterday that these measures will certainly go a long way in mitigating the pains of the MSME sector and also give them new energy and vigour.
Confederation of All India Traders secretary-general, Praveen Khandelwal said the announcement of in-principle approval of loan within 59 minutes reflects the government’s commitment towards the MSME sector and will certainly boost business in the country.
Federation of Indian Export Organisations said interest subsidy increase from three per cent to five per cent will provide competitiveness and a level-playing field to MSME exporters.
| Desk is ready |
| Jammu and Kashmir Commercial Taxes Department set up a GST facilitation desk at Excise and Taxation Complex here for food processing MSMEs of district Jammu.
The creation of the desk envisages hand-holding of MSMEs, particularly with regard to GST related issues, an official spokesman said. The help desk was made operational by Additional Commissioner, Commercial Taxes, S K Gupta along with nodal team of officers after the launch of ‘Support and Outreach’ initiative for MSMEs by Prime Minister Narendra Modi in New Delhi. Jammu has been selected among 80 other districts of the country where this outreach and support programme will run for the next 100 days. Department of Financial Services, Government of India, is the nodal agency to monitor the overall progress of the programme. Blurb: The decisions include providing discounts on new loans for GST-registered businesses, increasing mandatory purchases of products from MSMEs by State-run companies, making labour-law compliances easier, reducing government inspections of factories and simplifying environmental protection norms. |