• MSME in India

In 1961, with the merger of the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries; the Ministry of Micro, Small, and Medium Enterprises (M/o MSME) was formed. The MSME industry plays a crucial role in the development of the Indian economy. Its contribution to the country’s GDP is nearly a third of the country’s GVA and it contributes nearly half of the country’s exports.

Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.

Our Special Corner

  • GST, demonetisation impact on MSMEs: Read govt’s response on impact assessment, business recovery

The Ministry of MSME has not conducted any independent assessment of the impact of demonetisation and Goods and Services Tax (GST) on the growth of the MSME sector, informed Minister of State (MoS) in the MSME Ministry Bhanu Pratap Singh Verma in a written reply to a question in the Lok Sabha on Thursday. “In fact, the MSME sector has shown resilience in terms of GST growth despite the COVID-19 disruptions,” he said citing data on year-on-year growth in GST paid by MSMEs in FY22.

The FY20 and FY21 GST by micro enterprises stood at Rs 2.2 lakh crore and Rs 2 lakh crore respectively while FY22 collection stood at Rs 2.3 lakh crore, crossing the pre-pandemic levels. Likewise, GST paid by small enterprises remained flat at Rs 0.9 lakh crore in FY20 and FY21 but grew to Rs 1 lakh crore in FY22. Similarly, for medium enterprises, the GST paid dropped from Rs 1.9 lakh crore in FY20 to Rs 1.8 lakh crore in FY21 but recovered to Rs 2 lakh crore in FY22, according to the data from the 2022-23 Economic Survey cited by Verma.

Importantly, an August 2018 study by the Reserve Bank of India (RBI) noted that the introduction of GST had led to an increase in compliance costs and other operating costs for MSMEs as most of them were brought into the tax net. On the other hand, a study by SIDBI had indicated that post-demonetisation and post-GST introduction, the relative credit exposure initially declined for most MSMEs but had recovered fully by March 2018, FE Aspire had reported.

Meanwhile, a Deloitte survey in June this year collating 612 responses (including large enterprises and MSMEs) from six industries to comprehend India Inc’s views on GST noted that the tax system has had a significant impact on the Indian economy with 88 per cent of MSMEs reporting a reduction in goods and services costs along with optimised supply chains. MSMEs attributed the reduced goods and services costs to improved uniformity in the GST regime.

According to the survey, 88 per cent of MSMEs said the transfer of CGST/IGST cash ledger balance between “distinct persons” has reduced working capital blockage for businesses.

  • MSME Schemes:

The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.

  • Let us have a brief discussion on “Udyogini Scheme”

This scheme has received universal appraise for supporting the businesswomen of this nation. Under this programme, a small or micro enterprise lead by women entrepreneurs can be eligible to receive a subsidised MSME loan if it is based in a rural or underdeveloped locality.

Benefits

  • For women belonging to the Scheduled caste and Scheduled tribe, the unit cost is a minimum ₹ 1,00,000 to a maximum of ₹ 3,00,000.  The subsidy is 50% of the loan amount, income limit of the family should be below ₹ 2,00,000 per year.
  • For women belonging to the special category and general category maximum unit cost is ₹ 3,00,000.  Subsidy for special category women and for general category women is 30%  or a maximum of ₹ 90,000/-.  With EDP training for selected beneficiaries.

Eligibility

  • The applicant should be a woman.
  • The family income of the applicant should be less than ₹ 1,50,000/- for women belonging to general and special categories. No limit on family income for widowed or disabled women.
  • The age of the applicant should be between 18 to 55 years for all categories.
  • The applicant should be a permanent resident of Karnataka.
  • The applicant should not have defaulted on any past loan with any financial institution.

Documents Required

  • Three passport-size photographs of the applicant.
  • Certificate regarding training/experience of the activity under which the loan is sought.
  • Detailed Project Report (DPR) of the activity for which financial assistance is sought.
  • Ration Card / Voter ID Card.
  • Annual Income Certificate of the Family.
  • Caste Certificate (in case of SC/ST applicants).
  • Quotations for Machinery, Equipment, and other Capital Expenses
  • (Read more at: Click Here)

For eligibility, application process and other process, please get in touch with us.

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  • Trade Receivables Discounting System (TReDS) – Part 14

TReDS (Trade Receivables Discounting System) facilitates this process by allowing MSMEs to secure financing based on the creditworthiness of their buyers, eliminating the need to negotiate directly with financiers. TReDS ensures a seamless liquidity flow for MSMEs and contributes to filling the credit gap.

  • Govt, RBI looking to integrate GSTN with TReDS via account aggregator

The government and Reserve Bank of India (RBI) are looking to integrate GSTN (Goods and Services Tax Network) with TReDS (Trade Receivables Discounting System) platforms to enable direct sanctions of MSME invoices.

Integration will ensure that e-invoices raised by MSMEs on GSTN can come directly to the TReDS portal, thus negating the need for any additional activity or documentation, industry players said, adding that it could greatly improve the working of TReDS platforms over a period of time.

It will also lead to faster loan underwriting and sanctions as sourcing directly from the GST platform will provide more assurance and comfort to financiers with respect to the genuineness of invoices. In addition, it will help build an alternative credit database, especially for MSMEs with weak or minimal credit history.

The GST network is likely to be integrated through the account aggregator model to ensure data privacy and security, sources told businessline.

In February 2021, the Standing Committee on Finance headed by Jayant Sinha had recommended the integration of TReDS platform with GSTN e-invoicing portal to allow real time sharing of data through a single window of access to authenticated invoices.

However, so far, no decision has been taken due to operational, implementation challenges and data sharing concerns, industry players said.

“CPSEs are not coming in so far but we have been seeing demand from States. This should only improve with the integration of the government portals,” an official said. Goa and Tamil Nadu are already active, and Madhya Pradesh, Uttar Pradesh and Haryana are expected to join TReDS soon.

  1. EU raises data privacy concerns over proposed G20 MSME portal

The European Union has raised data privacy concerns at the meta information portal that India has proposed for the micro, small and medium enterprises (MSME) of the G20 countries. The portal is sought to have details of MSMEs of every G20 member including the sectors and products they deal with.

Establishing an online digital portal is crucial as it would offer integrated research, trade and business information for market research by the MSMEs.

“Some members, including the EU, have raised data privacy concerns. They have asked how will the portal and data be managed,” said an official.

Officials said that setting up the MSME portal is one of the three high-ambition goals, an outcome on which is being seen at the upcoming G20 Trade and Investment Ministerial meeting in Jaipur from August 24 to 25.

As per the official, virtual negotiations are going on for all the issues and five annexes are likely to be a part of the ministers’ communique. Some G20 members have also had apprehensions with the digitisation goal, which involves transparency provisions.

As per sources, at least 14 trade ministers have confirmed their presence for the ministerial including those from Canada, China, Russia and the UK. The US Trade Representative and the European Commissioner for Trade have also confirmed their attendance.

  • Unlocking operational efficiency of MSMEs: The power of increased credit access

In today’s rapidly evolving business landscape, micro, small, and medium-sized enterprises (MSMEs) face numerous challenges that hinder their growth and profitability. However, a significant opportunity lies before them— as a result of a recent surge in access to credit. The RBI recently announced an increase in credit to MSMEs by 14.4% (YoY) in their FY23 annual report.

The government’s proactive measures to ease access to credit for MSMEs are highly commendable and have had a significant impact on fostering their growth. The implementation of priority sector lending guidelines by the Reserve Bank of India (RBI) ensures that bank loans extended to MSMEs qualify for classification under priority sector lending, enabling easier access to credit. Additionally, the mandate for scheduled commercial banks to not require collateral security for loans up to Rs 10 lakh to MSE sector units has further facilitated credit availability.

This newfound access to capital has the potential to revolutionise the way MSMEs operate by enabling them to invest in modern technologies, maintain optimum inventory levels and cash flows, optimise processes through automation, and foster innovation through research and development (R&D). It truly has the potential to enhance operational efficiency and unlock potential.

The digitalisation of MSMEs helps them create new business opportunities and revenue streams, acquire new customer segments, and improve operational efficiency and employee productivity. Emerging tech-based platforms are now helping MSMEs upscale and integrate their operational capabilities. Most tech-based platforms specialise in various domains, helping them cater to various facets of MSME operations such as planning supply chain & logistics, channelising workflow among interlinked departments and monitoring product quality.

Operational inefficiencies can be a significant roadblock for MSMEs striving for growth. Access to credit provides MSMEs with the means to optimise their processes and embrace automation. By investing in business process reengineering, adopting lean methodologies, and implementing robotic process automation (RPA), these businesses can eliminate bottlenecks, reduce waste, and enhance operational efficiency. Automating repetitive tasks not only saves time and labour costs but also minimises errors and improves overall process accuracy. This streamlined approach allows MSMEs to focus on core competencies, improve service delivery, and gain a competitive edge in the market.

The government buffered micro, small and medium enterprises (MSMEs) from bankruptcy with Rs 3.5 lakh crore loan support during the Covid-19 pandemic, said Prime Minister Narendra Modi in his Independence Day speech on Tuesday.

PM Modi said, “MSMEs were not allowed to go bankrupt with the help of loans worth Rs. 3.5 lakh crore in the crisis of Coronavirus. They were not allowed to die, they were given strength.”

For cash-strapped MSMEs, money has always been a problem. A report by Global Alliance for Mass Entrepreneurship (GAME) with Dun & Bradstreet and Omidyar Network India revealed that an estimated 5.9 per cent of the gross value added (GVA) in the Indian economy i.e. Rs 10.7 lakh crore is locked up in delayed payments from buyers to MSME suppliers.

On the new and aspiring middle class, Modi said, “When poverty reduces in the country, the power of the middle class increases a lot. And I assure you with a guarantee that in the coming five years, the country will take its place in the first three world economies.”

He added that today 13.5 crore people have come out of poverty to become the strength of the middle class. When the purchasing power of the poor increases, the business power of the middle-class increases.

Additionally, the Prime Minister said that when the (exemption) limit of income tax is increased from Rs 2 lakh to Rs 7 lakh, then the biggest benefit is to the salaried class, especially to the middle class.

Referring to the recent problems faced by the world collectively, Modi asserted, “The world has not yet emerged from the Covid-19 pandemic, and the war created a new problem. Today, the world is facing the crisis of inflation.”

Talking about fighting inflation, the Prime Minister said that India has tried its best to control inflation. “We cannot think that our things are better than the world, I have to take more steps in this direction to minimise the burden of inflation on my countrymen,” he stated.

  • 260% jump in funds utilised by MSME Ministry in 5 years: Govt data

The Ministry of MSME spent Rs 23,583.90 crore in the financial year 2022-23, over 260 per cent increase from Rs 6,513.13 crore spent in FY19, informed Minister of State in the MSME Ministry Bhanu Pratap Singh Verma in a written reply to a question in the Lok Sabha.

According to the data shared by the MoS, the expenditure of the MSME ministry was Rs 6,717.53 crore in 2019-20, which declined to Rs 5,647.50 crore in the following year. However, it increased to Rs 15,160.46 crore in 2021-22.

The government allocated Rs 22,138 crore in the 2023-24 budget estimate (BE) to the MSME ministry vis-a-vis Rs 3,327 crore allocated during 2014-15 BE and Rs 2,977 crore during 2013-14 BE. The FY24 allocation to the ministry included revenue expenditure of Rs 21,542 crore and capital expenditure of Rs 594.5 crore.

The breakdown of the allocation of the budget in the schemes by the ministry for FY24 shows would increase in the expenditure in the Prime Minister Employment Generation Program (PMEGP) to Rs 2,700 crore budget estimate (BE) from Rs 2484 crore revenue estimate. Similarly, the Guarantee Emergency Credit Line is planned to increase from Rs 10,500 crore to Rs 14,100 crore. The procurement and marketing (P&M) scheme witnessed a surge from Rs 40 crore in 2023 to Rs 96.35 crore.

Similarly, the World Bank-assisted programme Technology Centre Systems Programme (TCSP), to improve the competitiveness of MSMEs in manufacturing through access to improved technology, availability of skilled workers, and business & technical advisory services is being implemented with a budget of Rs 350 crore.

The Raising and Accelerating MSME Performance (RAMP)  scheme aims to strengthen institutions and governance at the centre and state and improve access of MSMEs to market and credit, technology upgradation and addressing issues of delayed payments and greening of MSMEs.

  • How tech innovation can alter workspace interiors, help enhance efficiency, productivity in MSMEs

In an era dominated by digital transformation, the seamless integration of technology into workspace interiors has emerged as a catalyst for amplifying efficiency and productivity among Micro, Small, and Medium Enterprises (MSMEs) in India. With a staggering 63 million enterprises contributing 30% to the nation’s GDP, 45% to its manufacturing output, and 40% to overall exports, MSMEs form the backbone of the Indian economy. However, they often grapple with challenges such as resource limitations and technology adoption. Exploring the intersection of technology and workspace design, let’s look into how tech innovation can alter workspace interiors, paving the way for enhanced efficiency and productivity in Indian MSMEs.

Further, for India to achieve its vision of a $20 trillion economy by 2047 and navigate the swiftly evolving business landscape, bolstering the Micro, Small, and Medium Enterprises (MSMEs) sector is not just a goal but a necessity. Effective solutions must address challenges by ensuring affordable credit, technological accessibility, streamlined regulations, and robust skill development infrastructure, with a focus on inclusivity across all MSME segments. This demands collaborative efforts, aligning investments with governmental priorities, and optimizing resources through partnerships between investors, government agencies, and industry associations. The resilience, adaptability, and agility showcased by MSMEs underscore their pivotal role in India’s economic fabric; empowering them ensures that they remain pivotal drivers of innovation and growth, propelling the nation forward toward its vision for India@100. (To read more – Click Here)

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