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Why Reviving SME & MSME Sectors Should Be Top Priority Post Pandemic

Why Reviving SME & MSME Sectors Should Be Top Priority Post Pandemic

The MSME (Micro, Small, and Medium Enterprises) sector employs over 11 crore workers. It constitutes 29% of India’s GDP and makes up 48% of total exports. The number of registered MSMEs is 90.19 lakh. However, there may be a total of 6.33 crore MSMEs broken up as under:

Micro Enterprises 99.4% 6.30 crore
Small Enterprises 0.52% 3.31 lakh
Medium Enterprises 0.007% 5000

The SME & MSME sectors were already facing a credit crunch for some time. But with the outbreak of the Coronavirus, the situation became even direr. U.K. Sinha, former chairman of SEBI, led an expert committee on the MSME sector. The committee submitted its report in July 2019, suggesting that the (MSMED) Act, 2006  needs to be amended to promote ease of doing business. And that was before the pandemic. With the state that the economy is in right now, the need to revive the SME & MSME Sectors, could not be more urgent.

The SME & MSME sectors are out of touch with the latest technology

The SME and MSME sectors suffer from a lack of technology-based production activities. With low investments in research and development and no technological application, these sectors simply cannot compete. The government should subsidize available technology so as to make these resources accessible for SME and MSME players. This will help cut costs, and improve the quality of their products and make them more profitable. The SME and MSME segments are suppliers for bigger manufacturers and industrial houses. The government should therefore invest in providing more back-end services to help improve their performance.

Additional Read – Find Out The Important Things Your Should Know About MSME Sector in India

The compliance framework is complex

At present, the compliance framework is way too elaborate. While the idea is conceptually sound and has in fact simplified interstate business, it cannot be denied that there is way too much paperwork involved. Most players in the SME and MSME sectors don’t usually have the required documentation. They don’t even have the capital to avail the services of experts. For the SME and MSME players, there should only be one mandatory identifier. This could be an Aadhar card or the company GST. This will dispense with the need for all other identifiers like an import-export number, and registrations with various entities including the Udyog Aadhaar portal, NSIC, GSTN, etc. The entrepreneurs will no longer be drowned in unnecessary paperwork and will have time to focus on core competencies. Even the U.K. Sinha report had recommended that PAN be made the Unique Enterprise Identifier (UEI) for the MSME sector.

Additional Read – New Business Loan Schemes for SMEs

Once we get a handle on the virus and control the rates of infection and fatality, reviving the economy in general, and the SME & MSME sectors, in particular, should be the government’s top priority. Millions of livelihoods depend on the performance of these sectors.

If you are looking for an MSME loan or any business loan, visit Tata Capital. With years of experience in the business, dedicated after-sales service and attractive business loan interest rates, Tata Capital is the right lender for you. Visit our website for more information.

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