Clipped from: https://www.thehindubusinessline.com/economy/delayed-payments-lack-of-formal-financing-in-msmes-affect-job-creation/article66576684.ece
Issue can only be tackled over time by maintaining constant pressure, says Chief Economic Advisor to Govt
The impact of delayed payments and the lack of formal financing for Micro, Small, and Medium Enterprises have adversely impacted the nation’s ability to create jobs, according to a report by the Global Alliance for Mass Entrepreneurship. Micro-enterprises alone employ an estimated 23 per cent of India’s total workforce
Around ₹10.7-lakh crore — is locked up in delayed payments from buyers to MSME suppliers — an estimated 7.8 per cent of the country’s gross domestic product (GDP), with 80 per cent of this estimated amount owed to micro and small enterprises, totaling ₹8.55-lakh crore.
While struggling with payment delays, business owners are also pressured by non-representative and exclusive evaluation criteria limiting their access to loans.
The report is focussed on addressing plausible solutions to resolve the financial crisis faced by the MSMEs. It also emphasises the creation of an additional 10 crore jobs by 2030.
It listed solutions such as streamlining credit guarantees, enhancing TReDS by integrating GST data, and rethinking the dispute resolution procedure for late payments, among others. Similarly, the government’s efforts to introduce schemes and norms will be expected to encourage credit flow and strengthen cash flow-based lending.
Anantha Nageswaran, Chief Economic Advisor to the Government of India, said, “The delayed payments are an issue that can only be tackled over time by maintaining constant pressure. Over time, through some of the legislative and budgetary announcements, we can slowly bring about a mindset shift, not just in the private sector, but also in the public sector.”
Furthermore, he added, “mechanisms and artificial interventions will no longer be necessary with prompt payment culture becoming embedded as part of normal large enterprise behaviour. In the 2023–24 Budget, the government has made it clear that payments to MSME suppliers cannot be claimed on an accrual basis and cannot be set off against taxable income unless the payment is actually made. Without a vibrant MSME sector, we cannot talk of India becoming a global economic power.”