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Last updated: 27 Aug, 2019  

Dollar.Investment.9.Thmb.jpg Stimulus package a relief to MSMEs

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Bikky Khosla | 27 Aug, 2019

The government last week came out with a much-awaited economic stimulus package. Finance Minister Nirmala Sitharaman announced an array of measures to help the economy that had been suffering from a complex set of problems. Interestingly, this time only a few of the support measures have any direct implications on revenue foregone or additional expense, therefore they don't amount to a traditional fiscal stimulus. The package is aimed only at removing some key hurdles to the economic activity.

The stimulus package includes, among others, several positive measures for the Micro, Small and Medium Enterprise (MSME) sector. It was announced that all the pending GST refunds of MSMEs will be paid within 30 days. The Finance Minister also announced that, in future, all GST refunds of MSMEs will be paid within 60 days. The sector has been severely hurt by demonetization, the goods and services tax and an ongoing liquidity crunch, and the proposed steps will give a major relief to the sector.

In her speech, the Finance Minister added that some key decision based on the U K Sinha Committee regarding ease of credit, marketing, technology and delayed payments related challenges being faced by the MSME sector will be taken within 30 days. The RBI panel called for a Rs 5,000-crore stressed asset fund for MSMEs and recommended amendment to the MSME Development Act to handle the delayed payment issue effectively. These recommendations definitely deserve attention.

It was also announced that the government would consider amendment to the MSME Act to move towards a single definition. Last year, the Union Cabinet approved a proposal to change the definition of MSMEs based on their annual turnover. Unfortunately since then not much progress is made. We need a better definition based on turnover, employment and other criteria so that the sector can be targeted with better policies and encouragement to grow instead of remaining small just to take advantage of such policies.

I invite your opinions.

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