Lauding the economic reform agenda initiated by the Prime Minister Narendra Modi-led NDA Government during its first term, stakeholders from the MSME sector have come up with their wishlist for the new Government.
Figuring on top of their list are the concerns related to the segment’s traditional pain points — a high cost of credit, unavailability of adequate and timely funding avenues and regulatory and compliance related bottlenecks, particularly about GST.
Summing up the perspective of the MSMEs, Anil Bhardwaj, Secretary General of the Federation of Indian Micro Small & Medium Enterprises (FISME), says, “If the government moves to implement the recommendations of RBI’s Expert Committee on MSMEs, which is likely to submit its report June end covering all aspects of MSMEs including finance, marketing, technology etc, that would take care of almost all the key demands of MSME sector.”
Talking about on-the-ground performance of the 25% procurement criteria under the Public Procurement Policy (PPP) as announced by Modi on November 2 last year, Bhardwaj stresses that the government should ensure that, keeping in view the spirit of the policy decision, procurement in central government purchase, provisions against delayed payments, priority sector lending, defence offsets etc, are implemented on the ground smoothly and remain hassle free.
Aimed at giving a fillip to the MSME sector, regarded to be the ‘growth engine’ of the Indian economy, Modi had announced the 25% procurement criteria as part of his 12 mega sops announced last year.
Under this, Public Sector Undertakings (PSUs), which were earlier mandated to source 20 % of their annual procurement from MSMEs, were thereafter mandated to source at least a quarter of their requirement (25 %) from the MSME sector. Further, out of the 25% procurement mandated from MSMEs, 3% was reserved for women entrepreneurs. Despite the ambitious vision chalked out, the changed norm is said to fall short of its intended aims.
Representative of industry-wide MSMEs association also pitched for a nationwide internet-based effective grievance redressal mechanism, calling it “an absolute must” where MSMEs could turn to for remedies to their problems.
Speaking on similar lines, Sameer Vakil – cofounder and chief executive officer, GlobalLinker, an MSME enabling platform, underlined that while NDA-I had worked to address many fundamentals of the economy and business environment – introducing GST and rationalising rate structures, demonetisation, ease of doing business, loan in 59-minute amongst other matters, NDA-II is expected to frame policies and drive programs to help Indian MSMEs and startups, take their rightful position in the global economy.
Urging new age businesses to be set up and removal of business irritants with regard to the ill-famed Angel Tax, new company registration process, sector incentives and incubation services etc, the industry leader wishes NDA-II to Improve access to financing and credit cycles for SMEs.
IBC Code aftershocks
While none can question government’s intent and rationale behind the introduction of Insolvency and Bankruptcy Code (IBC), industry leaders believe that there is still room to make it more pro-MSMEs.
“The I&B Code 2016 was one of the boldest moves of the government and initially was criticised by all or been considered as another law or mechanism to deal with huge NPA accounts however with the passage of time it is now one of the most powerful action in the hand of creditors (both Operational and Financial),” says Daizy Chawla, Senior Partner, Singh & Associates.
In recent times, due to insolvency process of a number of corporates, coupled with upheaval in the banking and finance sector, a large number of MSME players are said to be bearing its aftershocks in the form of unpaid bills, bad debts and NPAs. The industry has been voicing that many of the provisions of the initial I&B Code 2016 should thus be eased out further.
Exports need a helping hand
The exporting community that significantly comprises of MSME players (responsible for 40% of the country’s total outward shipments) also seems to be buoyed by the victory of the NDA Government.
Pinning hopes on the NDA-II to accelerate its reform agenda initiated during its first term and introduce key structural reforms needed to jumpstart the economic activity in the MSME segment, Mahavir Pratap Sharma, Chairman, Carpet Export Promotion Council (CEPC), says, “There should be smooth GST inflow and better labour law reforms. Change has to be initiated for labour reforms. Funding for the MSME sector should also be easier and more accessible. These are the three most important issues that should be addressed on a regular basis for a change to come by. If the government really wants to make an impact then the MSME sector will need due attention.”
Hailing PM Modi’s various digital initiatives for MSMEs, Ankit Gupta, vice president, ExportersIndia.com, opines, “We have been on the path of digitalization and global exposure since the past few years now. We hope that in the future too, there is a focus on easing the path for MSMEs.”
According to Gupta, private investment and consumption would be two key facets that would need some fast paced working to set the economy ticking. “MSMEs look forward to the liberalisation of policies so that they are able to innovate, invest in new technologies and equip themselves to adapt to the changing business environments,” he adds.
NBFC Sector: Optimistic of the times ahead
Representatives from NBFC and fintech segment, that along with traditional banking sector, has in recent times, emerged as an important player for addressing Indian MSMEs huge unmet credit demand estimated at approximately $200 billion, have also raised their yet-to-be-addressed concerns with UPA-II.
Alok Mittal, CEO and Founder of Indifi Technologies, a fintech platform, said, “We expect the new government to define concrete steps to mobilize access to financial services and empower the fintech companies that facilitate them. Extending credit guarantee schemes such as MUDRA and facilitating better data access to alternate lending companies can help in bolstering the impact and reach of these initiatives. Doing so can ensure high growth potential for MSMEs in India – being one of the most dynamic and critical sectors of the nation’s economy.”
Pushkar Mukewar, cofounder, DRIP Capital, hopes that in coming times, a slew of measures announced to improve credit access for MSMEs will be put into action. “What is now needed is a big push to promote fintech in areas such as MSME lending and export finance, to help solve the credit gap problem for the MSME sector,” he said, adding that if PSUs are indeed mandated to ensure that 25% of their purchases are from MSMEs, this will give the sector some much-needed impetus.
Pitching for increased uniformity in GST and easing out of its compliance-related bottlenecks, he hopes that existing wrinkles in GST will be ironed out in the next few years.