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Modi's fiscal package silver lining for small, medium businesses
May. 15, 2020
> MSMEs contribute to 29% of India's GDP and employ over 12 crore people
> The sector has been grappling with liquidity issues as the nationwide lockdown brought all businesses to a standstill
India's small and medium enterprises (SMEs), which is among the worst-hit sectors amid the covid-19 crisis, hopes that Prime Minister Narendra Modi's ₹20 lakh crore economic relief package would revive liquidity, bringing the sector back to life.
Though the details of the economic package are due to be announced later on Wednesday, the measures are likely to focus on micro and small industries and medium enterprises, according to industry and government officials.
"I broadly appreciate the stimulus as we have no choice but to restart the economy. If the stimulus could be directed to revive 'Make in India' and 'Tech in India' in a sustainable way, it would be transformative. As regards going local, I have a list of 10 industries... Where India should build an eco-system totally independent of China," says Rajesh Sawhney, founder GSF Accelerator.
MSMEs contribute to 29% of India's GDP and employ over 12 crore people, according to reports. These businesses usually depend on month-to-month operation, with little reserves for the future.
The financial package, said the Prime Minister, is equivalent to 10% of the country's gross domestic product (GDP).
"The biggest worry is, of course, a liquidity crunch, followed by a disrupted supply chain, labour availability and regulatory issues that have affected the MSME sector. The government must look at providing loans to cover wages, suspension of contributions to employee’s provident fund and Employee State Insurance Corporation (ESIC) for six months," said Sandip Chhettri, Chief operating officer (COO), TradeIndia.
"The government must clawback GST (goods and services tax) that has already been paid. It also much look at creating liquidity by clearing dues from government departments, public sector undertakings, GST refunds and fast-track the process of tax refunds," Chhettri added.
MSME must be given easier access to bank loans, especially at low rates, with help from the central and state governments, he said.
Similarly, agritech startups are looking for financial assistance.
"In the ensuing season, farmers should get liberal financial assistance to purchase seeds, fertilizers and other agri-inputs so that they don’t waste one entire crop-cycle. Second, the government should ensure agri-tech startups enjoying ‘zero income tax’ status similar to agriculture income," said Amith Agarwal, co-founder & chief executive officer (CEO), AgriBazaar.
"By recognising agri-tech startups in the same line as agriculture, the government will spur deep investments and innovation in this sector. Today, the only solution to India’s agri woes is localized technology interventions that are relevant for the small farm owner or agri-landholder," added Agarwal.
PM Modi also focused on the importance of local manufacturing, market and supply chain, which are bound to include a host of small and medium businesses apart from large companies.
“Firstly, I believe this is the right time to go aggressive and take share of global trade to put India way higher on economic front. Secondly, given Mamaearth is a 100% made in India brand by choice, the #vocalaboutlocal will give a strong push to homegrown brands and businesses." said Varun Alagh, founder and CEO, Mamaearth.
Source: livemint.com
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