Union Budget 2019 India: To keep the inflation levels in check, RBI is treading on high-interest rates, which is damaging to long run progress of the country.
By Sudhir Singh
Budget 2019 India: SMEs and MSMEs are undoubtedly the backbone of country’s progress on world map. With around 63.4 million units across the country, the sector is one of the largest employment generators. For many decades, their significant role of acting as a catalyst to bring socio-economic transformation has been under estimated and underserved. Pushing the sector to face challenges such as, low access to finance and technology, availability of adequate infrastructure, and skilled labour, etc. India can achieve the 5 trillion-dollar economy plan provided, we address the challenges and gaps more effectively and efficiently, the sector has a huge potential to grow provided we offer them technological advancement similar to the big corporate at an affordable rate make them flourish and grow with light speed.
Both at policy and industry level, concerns have been raised regarding the difficulties they face and need for additional support that is required to extend better prospects of growth. This is peak time for the nation to bring out these issues and challenges from discussion forums and policy drafts to real time action. Inspite of being the second largest employer in the country (only after agriculture) MSMEs contribute 29 percent in our country’s GDP. Understanding the huge growth and innovation opportunity that lies in this segment and the resultant positive effects to the economy, the Ministry of MSMEs has decided to increase contribution to GDP to the bigger level and provide 15 Crore jobs in 5 years.
The department has set a very ambitious target, yet attainable. The new policy measures seem to be targeted at high growth and supportive environment. After a long time, sector and policy innovation are complementing each other. If the building blocks of the much-desired ease of doing business are laid down effectively then this segment will surely grow. This Union Budget clearly defines movement in this direction such as Government’s announcement to create a payment platform for MSMEs to enable filing of bills and payment. This will help eliminate delays in payment in MSMEs. Since government payments to suppliers and contractors are a major source of cash flow, especially to SMEs and MSMEs, investment in MSMEs will receive a big boost if payment delays are eliminated.
The government also aims to set up more common facility centers under the Scheme of Fund for Upgradation and Regeneration of Traditional Industries (SFURTI). This will facilitate cluster-based development and give more power to traditional industries by making them more productive, profitable and capable of generating sustained employment opportunities in their regions. The regular and stable access to funds would help these companies to adopt technology and upgrade their systems for smoother functioning. Opportunity and income generation in rural and semi-rural areas would speed up development and standard of living.
If we take a look at few of the smaller countries who have set growth benchmarks in the MSME sector, two common drives are fruitful credit environment technology adoption and increased participation of SME and MSME in Global Value Chains. Hon’ble minister for micro, small and medium enterprises (MSME) has proposed the constitution of an ecommerce platform which can certainly connect our growth aggregators to the global market.
To keep the inflation levels in check, RBI is treading on high-interest rates, which is damaging to long run progress of the country. Easy credit from domestic banks at lower interest can multiply the growth of SMEs and MSMEs and encourage more entrepreneurs to join the segment.
Growth of SMEs and MSMEs will create huge number of job opportunities in the country, answering to the huge job opportunity gap that we are facing. We need to look the employment issue from a demand to deliver perspective as currently we should be focusing more on creating demand based skilled workforce.
Growth at 10% for 10 years is required to end poverty and unemployment in our country, this seems like a far-off dream right now and so does elimination of Income Tax. Still if plans are brought into execution properly, financial wellbeing of citizens of this country can be assured with a robust and cherishing MSME ecosystem.
(Author is co-founder and Managing Director, Marg ERP Limited. Views are personal)