'A lot more can be done for MSMEs in Budget 2014'

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Saurabh Gupta | 12 Jul, 2014
Commenting on the Budget - 2014 presented by the Finance Minister Arun Jaitley on Thursday, an apex industry body has said that every one knows the issues of micro, small and medium enterprises (MSMEs) and so Hon'ble Minister of Finance can do more rather setting up a committee to examine the issues of sector.

"We (Industry bodies) have been suggesting the issues of SME sector like issue of finance, high interest rate and issue of power (electricity) to the government from very first day. Knowingly the all major issues there was no need to propose to appoint a committee to study issue of MSMEs," ASSOCHAM's Secretary General D S Rawat told SME Times at a press meet on Thursday.

He said, "A lot more can be done for the development of this sector." Rawat emphasized that every one knows that the non-availability of credit at low interest rate and issue of non-availability of adequate and uncut power supply were the biggest hurdle in the growth path of SMEs, which has been the ASSOCHAM's recommendation for the last five years.

Finance Minister in his budget speech said that there was need to examine the financial architecture for this sector. And so he proposed to appoint a committee with representatives from the Finance Ministry, Ministry of MSME, RBI to give concrete suggestions in three months.

However he had quoted "SMEs form the backbone of our Economy. They account for a large portion of our industrial output and employment...Financing to this sector is of critical importance, particularly as it benefits the weakest sections."

As remember the last government had also constituted a MSME task force, under the Chairmanship of TK Nair, when UPA II was formed in 2009.

On the other hand, Bikky Khosla, CEO TradeIndia.com and Chairperson e-commerce committee of ASSOCHAM, welcomes the Budget - 2014. He call it a growth oriented budget rather a populist budget.

He welcomes the Rs 10,000 crore venture capital fund proposed for MSMEs. He said, "This is the first time that any government is thinking of venture capital fund for MSMEs." In order to create a conducive eco-system for the venture capital in the MSME sector government proposed to establish a Rs. 10,000 crore fund to act as a catalyst to attract private Capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies.

Chandrajit Banerjee, Director General, CII, said that budget lays out medium term vision for the economy and meets industry expectations on growth and employment. He further said that CII is happy to note the encouragement to manufacturing through various measures such as opening defence, insurance, and e-commerce sectors to FDI, correcting Inverted duty structure, setting up of industrial clusters and promoting entrepreneurship.

A programme to provide forward and backward linkages with multiple value chains of manufacturing and services sector will also be put in place along with a friendly legal bankruptcy legal framework for SMEs to facilitate easy exit which were CII's key recommendations.

Alok Saraf, executive director - private and entrepreneurial practice, PwC India, said, "Modi government has just served a healthy "Chai" to all the SMEs & start-ups."

He said, "An investment allowance of 15 percent for the SME investing more than Rs. 25 Cr in plant & machinery will be a booster as against the earlier investment threshold of Rs. 100 Cr to claim the said allowance."

"An Rs 10,000 crore corpus fund and simplified bankruptcy rules may improve the risk taking capabilities along with providing an easy exit opportunity. All in all, the initiatives coupled with sector specific indirect tax benefits are sure to encourage the entrepreneurs," added Saraf.

R. Narayan, Founder & CEO, Power2SME, said "The Union Budget is extremely encouraging for the start-ups and the SMEs. The proposal of establishing a Rs.10,000 crore venture capital fund for start-up firms will act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies. It will create a favourable ecosystem for the start-ups to flourish."

The revision of the MSME definition for high capital ceiling, will enable the SMEs to get greater credit from the market, in turn helping them to grow and expand.

Additionally, the setting up of 20 new clusters and sanctioning of Rs. 200 crore for development of 6 more textile clusters will provide a platform for SMEs to share best practices, pool resources and grow their enterprise fast, along with generating employment opportunities, thereby affecting the growth of the Indian economy in a positive manner, added Narayan.