Finance
The major challenge MSMEs face is of finance. In Budget 2019-20, the government has injected Rs 70,000 crore into the banking system. That should help ease MSME finance. Second, they have strengthened the NBFCs which is important as they do the last mile delivery to the MSMEs. So, strengthening NBFCs should help MSMEs get finance. The third thing they have done is to set up a payment portal. MSMEs face a lot of financial difficulties because of late payments by their buyers. The payment portal should help ease some of those issues.
Ease of doing business
In terms of ease of doing business, one of the important steps is the reduction of the number of GST returns from three to one per month. That will help ease the load of compliance. The government has also made it quarterly for units with turnover below Rs 5 crore.
The second thing which is very positive, is that they have made PAN and Aadhaar substitutable for income tax. Now, one of the things we recommend from FICCI for MSMEs is that you should basically have the Aadhaar as the only individual identifier and the GST as the identifier for the company. You should not need any more identifiers, any more reports, any more cards. This is the first step towards phasing out the PAN and we look forward to maybe getting rid of the PAN, the DIN and the IEC, because these are all vestigial now with electronic identifiers like the Aadhaar and the GST. We should slowly get rid of everything else. This is a very positive step.
Women: Grassroots entrepreneurship
The other thing, which is very significant but is not receiving the kind of attention it deserves, is the scheme they have done to develop rural entrepreneurship amongst women. They have authorized loans of Rs 5,000 per member of any SHG. Remember Muhammad Yunus transformed the country with micro credit in Bangladesh. If women run businesses and they earn the money, it is well established that the economy gets what is called a double dividend because women tend to spend more on the health and education of their children. Today, if you see Bangladesh, its quality of life indicators are better than India though its per capita income is less. That is because women are spending the money. This was brought about by giving each women Rs 3,000 loan. Now our government has promised a loan of Rs 5,000 to crores of rural women. I hope we will see a somewhat similar transformation.
Another recommendation FICCI had given to the MSME ministry was that we should try and create MSMEs in a few of the SHGs. The promise of Rs 1 lakh loan to one woman to enable her to set up a micro unit can be transformative for the entire rural economy. The step that further needs to be taken is to connect these rural economies to the market. Now how do we connect them to the market? Currently, it is e-commerce and the digital platforms which will be required to connect these women who can now produce things. Of course, they can sell within their community but to connect them to the urban areas and to the global market, we will need e-commerce. The government needs to take further steps to enable that by creating training centres and tying up with major portals.
I very much welcome the emphasis that the government is putting on crafts as crafts are our traditional MSMEs. Traditionally, India was one of the largest exporters in the world producing these crafts. The advantages of using crafts and creating a world focus on craft and craft-based clusters are you don’t need too much skilling as people already know what is required, and you don’t need much capital investment because the tools and equipment are already there. And, the third advantage in this new age is that crafts have a very low carbon footprint. So, if you produce a shirt using the normal factory technology, you will need about 50 litres of water but if you produce it using khadi you may require 2 or 3 litres of water. So, I think this is a wonderful focus area that the government has picked up and, if properly pursued, we can get livelihood out to the villages and reverse rural migration.
(The author is Chair, FICCI National MSME Committee and Director, Touchstone Gems & Jewellery (India) Pvt Ltd)
