The micro, small and medium enterprises (MSMEs) sector, the cornerstone of the Indian economy, has got a boost in the Interim Budget of 2019. With the Budget largely focused on the rural segments of the country, this will benefit the MSME sector greatly as 51% of all 634 lakh MSMEs are based in rural areas, consequently being a vital source of rural employment. The push given to the MSME sector in the interim budget 2019, can only build on the various steps taken by the Indian government in the past five years to better the lives of the MSME sector. Here are five ways life became easier for MSMEs in the last half a decade.
1. Ease of Doing Business:
The implementation of the Goods and Services Tax (GST) reform across India comes as a boon to businesses that had to earlier adhere to a complex system of 17 different types of taxes. Earlier, every state had different tax laws and doing business in multiple states would mean adhering to these different tax laws, compliance through different portals and answering to authorities in these different states. All this has now been simplified into a single online platform. This is not only helping MSMEs dealing in different taxes earlier, but also aiding businesses being covered under dual taxes. Also, the stringent and archaic labour laws have been amended to provide relief to MSMEs by limiting the filing of returns only once in a year. The redundant environmental clearance and consent have now been merged into a single consent and any related return will be accepted through self-certification.
2. Business Incubators and Access to Markets:
The movement of more and more businesses into the formal economy is evident from the significant increase in GST taxpayer base. It has brought more visibility and thus more opportunities to the MSMEs in the formal sector. Business incubators set up by various state governments and the central government in India have opened up new operational and credit avenues for MSMEs. The main idea behind the setting up of these incubators is to nurture innovative business ideas, which can be commercialized within a year. State-specific MSMEs now have access to larger markets beyond their local markets, and things have been even easier for e-commerce suppliers. It is also now mandatory for the public sector units (PSUs) to procure any infrastructure from Government E-marketplace(GeM), the government’s e-commerce portal that houses about 1.5 lakh MSME suppliers. Supply of goods to the government will help women-owned SMEs and MSMEs achieve stability in business and improve their scalability.
3. Access to Credit:
Bringing relief to GST compliant MSMEs, a 2% interest subvention has been facilitated for all the GST registered MSMEs, for all fresh and incremental loans. A key step towards this was the launch of a 59-minute loan up to Rs. 1 crore, to enable easy access to credit for MSMEs. The government is also pushing funding to small businesses through schemes like MUDRA since it considers them to be a job generator and growth engine. Financial lenders like Finserv MARKETS offers you a customised range of small business loans at Finserv MARKETS like an unsecured machinery loan up to Rs. 30 lakh for buying firm’s machinery and equipment, or MSME loans up to Rs. 30 Lakh to meet your working capital and overhead costs, for competitive rates of interest. Additional benefits of Bajaj Finserv Business loans available at Finserv MARKETS also include collateral free funds, flexible repayment tenor, and online fund management facility.
4. Technology Upgradation:
The Indian government has also set up a Credit-Linked Capacity Subsidy Scheme (CLCSS) to help micro and small enterprises with technological upgrades. Under the scheme, eligible MSMEs are being provided with a 15% subsidy (up to a maximum of Rs 15 lakh) to upgrade their technology. This is an improvement to the earlier scheme that only allowed a 12% subsidy, up to a maximum of Rs 4 lakh only.
5. Marketing Assistance to MSMEs:
Marketing is the key to the sustained growth of your business in an effective manner. It would require you to expand your customer base and increase revenue by marketing it domestically as well as in international markets. Only when your business’ top line revenue increases to a substantial amount, you can grow your MSME business and expand into newer markets. The Indian government facilitates a Marketing Assistance scheme to provide funding for the marketing activities undertaken by the MSMEs. The scheme covers financial costs for the following activities.
- Organizing exhibitions at international locations.
- Participating in international exhibitions or trade fairs.
- Co-sponsoring exhibitions, which have been organised by other organisations, industry associations or agencies.
- Organizing buyer-seller meets, marketing promotional events or intensive campaigns for the business.
6. The Way Forward:
At present, the MSME sector accounts for 45% of India’s industrial output, and 40% of exports. To be able to meet the needs of India’s large population, the country needs to create around 15 million jobs every year, and the MSME sector can contribute significantly to employment generation and development of the economy. With the current government initiatives in place that revolve around helping enterprises in the MSME sector, and the investments being pumped in by both foreign and domestic enterprises, we can expect MSMEs to emerge as the strong backbone of the Indian economy in the near future.
Read more on MSME Databank
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