MSME to be economic activity hub in India, says study

 
According to a project study conducted by the Associated chamber of commerce and industry of India(ASSOCHAM), the MSME sector can also grow rapidly thus contributing to country’s overall economic growth if commercial bank’s relax their interest rates regime for this segment.

The chamber claims that the government is expected to take a decision in next few month’s time to make it compulsory to source minimum of 10 per cent of it’s purchases from MSMEs “since a proposal to this effect is under active consideration of Ministries concerned.”

The positive and favourable decision in the regard will empower MSMEs to strengthen themselves monetarily and encourage this lot for making quality products. In addition, the implementation of the proposed Goods and Service Tax (GST) next year will benefit MSMEs, the chamber said.

GST to fuel growth

The chamber is also of the view that overall cost of collection and compliance will go down after GST is put in place. This will benefit the MSME segment the most. The GST will also increase its base since taxation rates will go down and their administration cost will fall due to revolution in IT enabled regime, the study said.  The ASSOCHAM President Swati Piramal said, if the government takes these steps, the MSME segments like auto and ancillary industries, pharmaceuticals, IT and IT enabled services would be benefited immensely. The reason for this is because maximum recovery is happening from these identified sector, which will continue, fuelling hopes and aspirations for higher GDP growth not only for current fiscal but in fiscal 2010 -2011, said Piramal.  The current growth momentum has significant contribution from MSME’s sector because it has started picking up and the pick up is based on the credit off take in which a growth of close to 38 per cent  has happened in last six months or so, says the ASSOCHAM study.

Regulations

This momentum will continue and even multiply since a few months hence, the MSME segment will gradually come out of regulations, paving ways for banks and financial institutions to broad base and widen their credit off take to MSMEs at relaxed rates of interests.

This will further activate MSMEs for acquiring a focused attention from policy makers to increase its contribution to manufacturing as well as exports, Piramal pointed out.  There are approximately 1.3 crore MSME units in the country   producing about 8,000 categories products.

It is the second largest employment generating sector after agriculture providing jobs to nearly 4.2 crore people.