Live Budget Update By Epic Research : Expectations of SMEs from Union Budget 2015

Economic Survey_7

SME sector in India is flourishing with the immense support by the current Government. Indian SME s are the undisputed power house of the economy today. Not only are they generating millions of employment opportunities but are significantly contributing to our country’s industrial output. However, there is a need to bridge the challenge and expectation gap that exists today. While we see a positive trend in the start-up space in India, there are still challenges that act as roadblocks to their growth.

The SME sector has high hopes from the upcoming Union Budget. Recent announcements from both the Prime Minister and the Finance Minister have made it clear that the upcoming budget will be a marked departure from the current way the sector is functioning. The government is coming up with M SME policy soon and the sector is upbeat that the current government will address glitches faced by this sector. With the launch of campaigns like Make in India, Digital India and Swachh Bharat Abhiyan, the sector will get the needed impetus as the success of Make in India stems from the SME sector.

The previous budget allocated Rs 10,000 crores to the start-up s and also showed a way forward for the growth of this sector. The government is committed and dedicated to the M SME sector and can deliver better on its promises of reviving this sector and making business a less traumatic process for entrepreneur s by incorporating a few more suggestions the sector has. Despite its commendable contribution to the nation’s economy, SME sector is still lagging behind. There is a need to remove the bottlenecks – discrepancies in incentive schemes that include taxation, subsidies, credit based procurement of raw materials / input, etc.

The government should provide a stable industrial environment to strive for operational cost-effectiveness that will help to increase access finance for SME s which still remain a major problem. The economic environment needs to be more flexible for the sector. Also the complex set of compliance mechanism that needs to be followed to get clearance on starting a new business should be made simpler. A more simplified legal framework is required to ensure the growth of the start-up s. In addition, technological backwardness is a major concern for start-up s. The government should incentivize tech infrastructure for start-up s.

Banks should be frontrunners in enhancing institutional credit at cost-effective rates especially to M SME s, whose demands account for 97 per cent of the viable debt gap. Also, the prime responsibility of refinancing and recapitalizing small and micro lending and investing services/ institutions rests on banks. Banks are expected to develop adequate debt restructuring and insolvency resolution regimes to mitigate investment risks and control the burden of non-performing assets.

A quicker implementation of the GST will also pace up the SME growth. The Government has been contemplating on the implementation of the GST. Once the GST is implemented there will be a single marketplace which will break tax barriers between states, bringing in a uniform tax rate across the country. A stable indirect tax regime and the patronage of both Central and State government is the need of the hour to nurture the SME sector to reach greater heights.

M SME currently accounts to more than 38 million and contribute more than 38 per cent to India’s manufacturing output, 40 per cent to the total exports and is able to create 106 million jobs every year. Due to very high cost of business acquisition, low media budget, non participation in international events, the M SME branding and visibility is extremely poor. Hence, the finished products only contribute 17 per cent to the country’s GDP. Given that, channelization of finished products of the SME sector is the need of the hour.

With the start-up ecosystem evolving rapidly in India, it is probably the best time for small and medium enterprise ( SME s) to enter the market. The unfavourable taxation regime, high cost of starting a business and archaic laws, rules and regulations make the country indeed a hard place to set-up and run a business. The schemes are in place, but it is required to enhance the responsiveness and outreach of such schemes.

The government is well aware of the importance of the SME sector. The sector is positive about the Union budget that will be unveiled on February 28, 2015 given the forward looking policies planned by the current Government.

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