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Why Indian industry needs more than MSME sops

Why Indian industry needs more than MSME sops

News

Data from the Centre for Monitoring Indian Economy (CMIE’s) suggests that MSME have shown signs of a recovery in the past fiscal year

Important facts

Trends:

  1. Net Sales:
  • Net sales of MSMEs declined considerably between fiscal year 2012 and 2016. However, it improved in 2017-2018.
  • The improvement in net sales growth for MSMEs has been entirely driven by the manufacturing units’ sales growth
  • However, sales growth in the services sector declined for the third consecutive year in 2017-18.
  1. Credit: Data from Reserve bank shows that credit growth has also improved in recent months with the entire improvement led by credit growth to medium-sized enterprises.
  2. Jobs: The small and medium-sized enterprises has cut jobs for the seventh straight year in 2017-18.

Recent Government Measures for MSMEs:

  1. 59-minute loan portal (loans up to 1 core) to enable easy access to credit for MSMEs.
  2. 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
  3. Increase in interest rebate from 3% to 5%, for exporters who receive loans in the pre-shipment and post-shipment period

Pertaining issues:

  1. Regulatory red tape
  2. uncertainties in tax and investment policies
  3. infrastructural deficits
  4. Size-based policy relief measures: The measures are often counter-productive and discourage firms to grow by creating strong incentives to operate beneath the official size category.
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