19 October 2017

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Confederation of Indian Industries(CII) emphasizes on the necessity of creating a SME Exchange for raising risk capital by the SMEs. It also opines that procurement incentives are a must to create synergies between small, medium and the large industry.

Government of India is all set to take measures on how it can further motivate the Indian micro, small and medium sized businesses. The MSME segment itself is pondering on various aspects for further expansion.

 

The recent meeting called between the representatives of industry associations with regards to MSME sector and the Prime Minister Dr. Manmohan Singh, in New Delhi, looked into multitude of MSME related issues.

 

In this meeting, Confederation if Indian Industries (CII) highlighted the need for providing procurement incentives, enhanced depreciation on IT products, establishment of SME exchange, simplification of labour laws & creation of a uniform credit rating format and processes to facilitate credit availability for the MSMEs. The meeting was also attended by Dinesh Rai, Secretary, Ministry of MSME and Ashok Chawla, Finance Secretary, Ministry of Finance.

 

With such a high-level decision makers being presented on a single platform to discuss any issues related to the Indian MSME, it is important to acknowledge the core issues of the MSME community so as to address these issues.

The major challenges the MSME segment face are taxations, and support from the Government on supply chain mechanism. However, getting the right technology infrastructure that can leverage their business to a next level is also a challenge for a typical SME entrepreneur.

According to the CII statement, there is a need to provide tax benefits to companies to source from MSMEs and adhere to the payment schedule, as per the terms of the contract, agreed upon with their vendors. This would ensure the growth progression & upgradation of the vendors, in line with the requirements of the vendee and also help to address the issue of payments (delayed), through out the supply chain.

To improve IT consumption in the SMEs CII has recommended that the Government considers allowing 100% depreciation, once in a block of three financial years, for an annual investment in IT equipment and software up to a limit of Rupees Twenty Five Lakhs, to the MSMEs. This will significantly lower the tax burden on high-tech investment, induce large scale corporate buying of computers, which will raise labor productivity, increase economic growth and give a big boost to the MSMEs.

Need for SME Exchange

Facilitating the establishment of SME Exchange while ensuring product innovation and without compromising on risk management will reduce credit requirements on one hand, and broad base equity funding on the other, added the CII release. Towards this SEBI will have to devise separate standards of disclosure and compliance requirements to minimize the cost of listing and compliance, for facilitating the MSME listings.

Adding that the various employee related regulations such as the Provident Fund Act, The Employees State Insurance (ESIC) Act, the Factories Act, the Industrial Disputes Act, the Contract labour Act etc. are seriously impairing the growth of the MSME sector, CII has recommended that the recommendations made by the Working Group on Labour Laws by the Planning Commission and referred in the Report of the 2nd National Labour Commission must be discussed with the Industry, and the various labour regulations be suitably amended.

Commenting on the significant contribution of MSMEs to the Indian economy, the CII Director General, Chandrajit Banerjee said that 2008-09 has been a difficult year for Indian MSMEs. The primary reason is the domestic economic slowdown as a result of the global financial crisis and the other is the subdued export demand. He mentioned that, despite the tough time, the MSME sector has demonstrated its resilience. The sector has, however, been hugely benefited from the various measures that have been announced in the last nine months as part of the Government’s stimulus packages, he added.

Salil Singhal, Chairman, CII National MSME Council observed that though it appears that the worst of the crisis period is over, a complete turnaround is not within sight yet for most of the industry. The difficulty is particularly acute for companies and units which have large export dependence. He added that the CII recommendations for MSMEs regarding the procurement incentives, enhanced depreciation on IT products, establishment of SME exchange, simplification of labour laws & creation of a uniform credit rating format, have been tailor made, keeping in view the nascent stage in the economic recovery and the recent drought conditions in a large number of districts across the country.

In an attempt to facilitate & streamline the availability of credit/finance for the MSMEs, CII has recommended that RBI may constitute a group along with the Indian Banks Association and the credit rating agencies to work out a uniform credit rating format and processes to bring about transparency and speed to the credit appraisal procedure. At present while certain credit rating companies do undertake this activity, the problem does not get resolved because individual Bankers undertake the credit rating based on their own formats and internal risk assessment processes.

It is needless to comment that, this level of talks and forums clearly indicate better growth prospects for Indian micro, small and mid sized business. What is required is to come up with a clear cut implementation strategy and put serious efforts in the direction of creating better infrastructure for Indian SMEs.

Faiz Askari

 
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