Ease of Doing Business for MSMEs: A task force chaired by Dr KP Krishnan, former secretary, Ministry of Skill Development and Entrepreneurship and constituted by Ravi Venkatesan, founder, Global Alliance for Mass Entrepreneurship (GAME) has recommended measures to help revive MSMEs impacted due to the Covid. To ensure higher adoption of the stimulus package announced by the government for MSMEs, the task force said that 30 per cent of the stimulus package should be released for micro and small enterprises while NPA classification should also be relaxed so that borrowers can repay loans in a longer timeframe and digitise the bank guarantee process.
The recommendation report asked for strong execution of announced packages through state governments and local industry bodies as according to a recent survey of 45,000 MSMEs by All India Manufacturers’ Organisation, businesses are not clear about the eligibility, process and structure of the financial package announced by the government.
The task force, which has members including Persistent Systems Chairman Anand Deshpande, ITC chairman Sanjiv Puri, Apollo Hospitals joint MD Sangita Reddy, Teamlease chairman Manish Sabharwal and more, also asked for setting aside funds specifically directed at nearly 1 crore new-to-credit MSMEs with a condition to ‘formalize’ informal businesses. It also urged for enabling banks to support existing loans on MSMEs via a credit guarantee fund and ensure easy repayment options for higher recovery.
Due to Covid, 57 per cent of micro-businesses have left with no cash reserves while 65 per cent have had to depend on their personal savings to manage operations, according to the report. Moreover, close to 40 per cent of MSMEs have already tried to borrow money to survive even as only 14 per cent managed to get it from formal sources. Also, around 73 per cent MSMEs have reported a decline in orders and 50 per cent have indicated that inventory levels have increased by over 15 per cent.
In order to ease compliances and processes to start and run a business, the task force recommended the implementation of BRAP (Business Reforms Action Plan 2019) in states by creating implementation guidelines, metrics for success and increased ownership of the center on key recommendations. It has also suggested rationalizing compliances through “detailed assessment of associated laws (currently 58K compliances in India across sector, state, etc., leading to significant duplication and enhancing complexity, with 50 per cent of these being labor compliances).”