Diwali anticipated for MSME sector: Modi unveils dozen measures ahead of polls
Prime Minister Narendra Modi on Friday announced a 12 point package for micro, small and medium enterprises (MSMEs), aimed at giving them access to credit and increasing their cash flow, as well as a liberal business environment.
This comes two years after the Prime Minister announced the demonetization of old Rs 500 and Rs 1000 banknotes – a decision that has affected small and medium-sized businesses the most. The package, which he called a Diwali giveaway and includes a relaxation of labor law and environmental rules as well as changes in company law, may be a relief for small and medium-sized businesses, which are facing a shortage of liquidity due to problems with non-bank financial corporations. (NBFC) and weak banks.
Citing official figures, MSME Minister Giriraj Singh said 65 million companies employ 120 million workers in the sector and generate the highest number of jobs after agriculture.
“In this era of globalization, these reform measures will go a long way to strengthening the MSME sector. I myself will be doing targeted government outreach monitoring of small businesses in 100 districts over the next 100 days, ”Modi said here in the nation’s capital while announcing the move.
The Prime Minister announced a 2 percent interest subsidy to all registered Goods and Services Tax (GST) MSMEs on new or progressive loans up to Rs 10 million. Modi announced a package of Rs 60 billion for the creation of 20 hubs and 100 tool rooms for technological upgrading.
He also announced an increase in the interest rate subsidy from 3 to 5 percent for exporters who receive loans before and after shipment.
He also announced the nationwide launch of a web portal to sanction loans of up to Rs 10 million in just 59 minutes. The loan portal, which was launched as a pilot project in September, has already seen the approval in principle of 72,680 loan proposals worth Rs 236 billion.
Companies with an annual turnover of Rs 15 million or less are considered to be MSMEs and this definition will be broadened to include those whose annual turnover does not exceed Rs 50 million. MSMEs are allowed to file quarterly Goods and Services Tax returns instead of monthly returns.
“Raising the interest equalization from 3% to 5% is a timely decision and will help exporters obtain credit at competitive rates close to international benchmarks,” said the president of the Federation of Indian Organizations of India. export, Ganesh Kumar Gupta, adding that banks should act proactively. increase the flow of credit to the export sector as there is an approximately 50% drop in credit in August 2018 compared to last year.
A 2 percentage point cut in banks’ interest in MSMEs is a ‘real gift from Diwali’ and will encourage more businesses to register with the GST, said Confederation of Indian Traders Secretary Praveen Khandelwal .
In an effort to increase market access, central public sector enterprises (CPSEs) were asked to source 25 percent of their purchases, compared to 20 percent, from MSMEs.
Of the 25 percent, 3 percent of purchases will now be reserved for MSMEs owned by women entrepreneurs.
All public sector companies will also be a mandatory part of the Government Electronic Marketplace (GeM), which will provide market access for small businesses as out of 150,000 vendors on the portal, 40,000 are MSMEs.
All companies with a turnover of more than Rs 5 billion will be compulsorily brought on the system of discounting trade receivables (TReDS), which facilitates the financing of trade receivables of MSMEs through multiple financiers. “Often late payments for the supply of goods to large companies impact their cash flow and business is under pressure. This platform will help entrepreneurs, who can download confirmed receipts or invoices pending payment, to access bank credit, ”Modi said.
Modi said that MSMEs can now register their complaints related to late payments from large companies on the Samadhan portal of the MSME ministry and that the government will step in to ensure they receive their payments.
To “make doing business easier,” Modi said an ordinance has been enacted which no longer requires the entrepreneur to go to court for minor breaches of company law.
“For minor mistakes, under company law, entrepreneurs face criminal prosecution and sometimes they even have to go to jail. To resolve minor errors, go to court. Now that has to be resolved with penalties, ”Modi said.
Industrial clusters of small pharmaceutical companies will be created and 70 percent of the costs will be borne by the central government. MSME companies will now have to file their declarations under eight labor laws and 10 Union regulations only once a year, instead of the current requirement of two.
Instead of two separate permits (environmental permit and establishment permit) for setting up a business, under air and water pollution laws, the two have been merged into one permit. He also said that the routine inspection of companies for environmental standards will be drastically reduced as well as a computer-generated inspection for labor laws to remove the discretion of inspectors.