MSMEs and the Union Budget 2017

This is the time of expectations amidst the gloom of demonetisation. MSMEs hit worst in post demonetisation are looking eagerly to the FM for careful crafting of fiscal policy to boost the morale of MSMEs, particularly those in the manufacturing sector.

Banks have almost shut their doors to the manufacturing micro and small enterprises by biting their teeth strong through the recently amended SARFAESI Act provisions. Their courage melts in the case of corporate defaulters. Large corporate defaulters cast a shadow of default on their vendors in the small sector and the banks are unwilling to buy this argument though the NPAs in the small industry segment is not significant compared to their elder brothers.

Several units where power itself is a major input like induction furnaces, rubber, rolling mills, etc., the reforms in the power sector jacked up the price of this input by as much as 100% making them uncompetitive.

Start-up MSMEs find it almost impossible to invest in land because of its prohibitive cost. Building rural industrial townships by the States with the required infrastructure like, safe drinking water, industrial water, electricity, packaging, testing and branding or co-branding facilities, multi-storied residential complexes for the workers on lease basis with industry participation, primary and upper primary schools, creches, play grounds and cultural spaces would be the best alternative to boost this sector. Fiscal incentives like income tax exemption for a five year period for investments in such infrastructure would be in order.

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