The Union Minister of Finance may be lauding himself for having given the so called boost to the entrepreneurial spirit by turning attention to MSMEs, but the reaction from small business owners is quite different. The SMEs, MSMEs and startups continue to be disappointed as the budget does not benefit them in a quantifiable manner. Infact, they describe this budget as a big failure.
This, inspite of the fact that the MSME sector contributes 8 per cent to the GDP and is a major job creator for the youth of our country. Our FM has raised the capacity of refinancing of the Small Industries Development Bank of India (SIDBI) to Rs 10,000 crore and also allocated an extra Rs 500 crore to SIDBI to bring about a Credit Guarantee Fund for factoring which is a method of financing where a business owner sells his receivables to a third party (known as the factor) for immediate cash flow. But does this help?
SMEs critical about SIDBI
Those on the ground believe that SIDBI is non responsive and far secluded from the everyday problems of SMEs and will do very little to help them with their financial woes. Complains Manish Goel, General Secretary, Indian Industries Association and a small business owner based in Lucknow, “The SIDBI funding is all but absent in Uttar Pradesh even though the northern belt contributes 80 per cent to the manufacturing output.” What good then will the refinancing of SIDBI do to the MSMEs sector! It is indeed sure to leave the entrepreneurs disgruntled.
Actually, Goel and many of his kind were hoping for the enhancement of the limit of the credit guarantee scheme which was set up nearly a decade ago. The scheme gives collateral free working capital loans to small business owners to the tune of Rs 1 crore. “But with high inflation and spiraling prices of fuel, land and other essential commodities required for starting a business, one crore is certainly not enough. Even the banks continue to make a hue and cry about it,” says Goel.
Not too much optimism
The proposition of allowing the SMEs to tap the capital markets without an IPO also does not manage to excite most of the SMEs, Goel learnt on enquiring. With issues like arranging the working capital to deal, SMEs feel that most of them do not have the wherewithal to handle the compliance requirements that a listed company is expected to have.
Similarly, Manav Shankar CEO of Meranaukar.com cries foul about this budget. “Though the Finance Minister announced that his focus was the youth and his aim is to give a fillip to the entrepreneurial spirit, there are absolutely no enablers for start ups. At least a one year tax rebate was really needed to encourage more and more start ups in the country,” says Shankar whose company is a concierge service across 11 locations in the country.
R. Narayan, founder and CEO of Power2Sme, an online aggregator for SMEs comes with a neutral view. He opines, “The Finance Minister attempted to encourage the SME sector but his moves were not as aggressive as they should have been. A lot more could have been done to maximize the growth of SMEs. Today, a uniform taxation scheme is the need of the hour. A majority of the state governments have agreed to the need for a constitutional amendment but it is imperative for the central government to pass the GST bill within a clearly defined timeline. Additionally, a clustering approach for similar SMEs is the need of the hour as it would create an ecosystem that facilitates growth.”
Far found smiles
And when we asked Dr Arun Singh, senior economist at Dun & Bradstreet for his views, he seemed quite generous in his assessment. According to him, with the “available resources” the Finance Minister tried his best to empower SMEs. “Though there are no immediate or short term benefits for the start ups, in the long term the new announcements are sure to bore fruits. From the refinancing of SIDBI to giving easy access to capital markets and intent to introduction of GST, everything will help scale up. The non tax benefits that have been extended for three years to SMEs that are trying to graduate into a higher category leave a major reason to cheer.”
The tax incentives will enable the SMEs to grow in size while retaining its benefits and provide them the required time to compete with larger and established players.
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