Budget 2015


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

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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.


Union Budget 2015-16 Economic Survey : Link public support to Railways with reforms

Suffering for a long time from underinvestment, Indian Railways need greater public investments but the support should be clearly linked to reform of the structure of the organisation. Public investment in an efficient rail network can have positive effect on both manufacturing and aggregate output, and the effects are permanent, said the Economic Survey 2014-15 tabled in Parliament on Friday. It also envisioned “corporatised Railways entities” in the long run.

Successive plans have allocated less resources to the Railways compared to the transport sector, it added. “The share of Railways in the total plan outlay is currently only 5.5 percent vis-i-vis about 11 percent for the other transport sectors and its share in overall development expenditure has remained low at below 2 percent over the past decade,” the survey said. Highlighting the difference with that of China, it added: “In per capita terms, China has invested on an average 11 times as much over the same period, even though both countries have similar populations.” Underinvestment in the Indian Railways is also indicated by congestion, strained capacity, poor services, and weak financial health, it added.

Highlighting the difference with that of China, it added: “In per capita terms, China has invested on an average 11 times as much over the same period, even though both countries have similar populations.” Underinvestment in the Indian Railways is also indicated by congestion, strained capacity, poor services, and weak financial health, it added. Stressing on the need of support from government, it said: “Greater public investments once utilised efficiently can help the Railways to overcome some of these problems. In the interim, there is scope for public support of Railways, including through assistance via the general Budget”.

It, however, added: “any public support should be clearly linked to serious reform; of the structure of the Railways; of their adoption of commercial practises; of rationalising tariff policies and through an overhaul of technology”. The document further said that in the long run, the Railways must be commercially viable and public support for it should be restricted to equity support for investment by the corporatised Railways entities, and for funding the universal service obligations that it provides.

It also said there is a need for bold, accelerated programme of investment in dedicated freight corridors (DFCs) that can parallel the Golden Quadrilateral in the road sector alongwith associated industrial corridors. “Such an initiative will transform Indian manufacturing industry with “Make in India” becoming a reality,” it added. This impetus has the potential to boost greater private investment and do so without jeopardising India’s public debt dynamics, the survey said.


Union Budget 2015-16 Economic Survey : Shield local cos from competition to boost Make in India

Shield domestic companies from foreign competition through tariffs and mandatory local sourcing besides making regulations and taxes less onerous to boost ‘Make in India’ campaign, suggested the Economic Survey. The pre-Budget survey recommended three sets of measures, including few protectionist measures, to make India a global manufacturing hub.

“The final set of responses what might be called ‘protectionist’ would focus on the tradability of manufacturing, and hence consist of actions to shield domestic manufacturing from foreign competition via tariffs and local content requirements; and provide export-related incentives.

“The effectiveness of these actions is open to debate given past experience. Moreover, they would run up against India’s external obligations under the WTO and other free trade agreements, and also undermine India’s openness credentials,” it said. These initiatives, however, may not go well with the World Trade Organisation (WTO) which is against protectionist measures.

India is a key member of the Geneva-based multilateral body. New Delhi is already being fighting a case in the WTO on issue of local content requirement in the solar sector. India has always raised its serious concerns over increasing protectionist tendencies by the developed countries especially after the global financial meltdown.

Interestingly, the commerce and industry ministry always asks the domestic industry to face the global competition and not take protection of tariff walls. It has also said that ‘Make in India’ is not about protectionism. Further the survey, which was tabled in Parliament today, also called for “providing subsidies, lowering the cost of capital” and creating special economic zones for some or all manufacturing activity in particular.

The survey “loosely” termed these sets of responses as ‘industrial policy’. Talking about non-controversial steps, it said that there is a need to improve the business environment by making regulations and taxes less onerous, building infrastructure, reforming labour laws, and enabling connectivity. “All these would reduce the cost of doing business, increase profitability, and hence encourage the private sector, both domestic and foreign, to increase investments.

Indeed, these measures would not just benefit manufacturing, they would benefit all sectors,” it said. ‘Make in India’ is the dream campaign of Prime Minister Narendra Modi, which aims at making the country as a global hub of manufacturing and creating millions of jobs. It was launched in September last year.


Union Budget 2015-16 Economic Survey : Cos raised Rs 2.81L-cr in Apr-Dec of FY15; debt preferred

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Indian firms mopped up Rs 2.81 lakh crore from the markets during April-December period of the ongoing fiscal, with debt emerging as the most preferred route to garner funds for business needs, says the Economic Survey 2014-15. The trends remained sluggish in the primary stock market where the companies raise funds through the sale of shares via instruments like IPOs and FPOs despite a bullish equity market.

It has been private placement of corporate bonds that was used the most to meet funding requirements of businesses during April-December period of the current fiscal (2014-15). According to the Survey tabled in Parliament today, Indian firms mobilised a total of Rs 2,80,885 crore from the primary markets during April-December period of the current fiscal, higher than Rs 2,27,398 crore garnered in the year-ago period.

In the primary market, funds were raised through equity (IPOs and rights issue) as well as debt segments. Of the total funds raised, a large chunk of this amount or Rs 2,69,245 crore from private placement of corporate bonds, Rs 7,348 crore from other debt insruments and a mere Rs 4,292 crore was raked in through equity markets. Most of these funds were raised for expansion of business plans and to support working capital requirements.

“Private placements of corporate bonds account for the lion’s share,” according to the Survey. Despite a rally in the stock market, most of the funds were garnered through debt route. The BSE benchmark Sensex surged 27 per cent during the period under review.

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