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MSME (Micro Small Medium Enterprise ) HEMA SANKAR

Union budget 2k15 msme hema

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MSME(Micro Small Medium Enterprise)

HEMA SANKAR

MSME sector contributes greatly to growth of Indian economy with

• a vast network of around 30 million units,

• creating employment of about 70 million,

• manufacturing more than 6000 products,

• contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly.

This sector even assumes greater importance now as the country moves towards a faster and inclusive growth agenda.

MSME sector which can help realize the target of proposed National Manufacturing Policy of raising the share of manufacturing sector

in GDP from 16% at present to 25% by the end of 2022.

The Central budget has several positive measures making it easier for MSMEs to access finance

Creation of MUDRA Bank Formation of TReDS Electronic Receivables Discounting System Setting up of Payment Banks of Postal Dept Gold monetization Scheme, Customs duty cut, service tax

exemption Start-ups and formation of a new National Skills Mission

Creation of MUDRA Bank

We have to welcome the creation of a mechanism to finance the receivables of the MSMEs as this would help improve their cash flow and rid them of the hassles they faced in receiving the payments due to them for the supplies they had made.

• Union Finance Minister Arun Jaitley had proposed the the establishment of a establishment of a Micro Units Development Refinance Agency Micro Units Development Refinance Agency (MUDRA) Bank. This would have a corpus of Rs. 20,000 crores and a credit guarantee corpus of Rs. 3,000 crores. Jaitley said that the MUDRA bank would refinance Micro-Finance institutions through a Pradhan Mantri Mudra Yojana and said priority would be given for lending to SC/ST enterprises. Apart from giving a boost to first generation entrepreneurs, it would also help existing small enterprises to expand their businesses.

• The creation of a substantial corpus of Rs. 20,000 crores for refinance would inject a massive credit flow into the system and the cash on rotation would be even as high as 5 times of this amount ( Rs. 1 lakhs crores).

• Most of the loan seekers under this category wanted small sums ranging from Rs.10,000 - Rs. 50,000 to fund their businesses. For them, even to get this meager amount from traditional financial institutions would be difficult, forcing them to go to private money lenders paying high interest rates.

• The creation of a formal financing mechanism to these borrowers would have a significant impact in improving the quality of life of people at the bottom of the pyramid, particularly in rural areas.

Formation of TReDS

• The Finance Minister had said that the government was on course to establish an electronic Trade Receivables Discounting System (TReDS) to finance the trade receivables of the MSMEs from corporate and other customers through multiple financiers. The minister said `this should improve the liquidity in the MSME sector significantly’.

• It is told that the major problem faced by the MSME sector was in getting timely payments, mainly from PSUs and large clients. It normally took 30 days to 90 days or more.

• When because of disputes over quality or financial constraints, payments were delayed, the suppliers had to go to facilitation council to get their money which soured the relationship between the suppliers and their defaulting clients. The industry has been clamoring for creation of a mechanism to make it legally binding for timely payment or provision of a factoring service so that the MSMEs got their money on time

Electronic Receivables Discounting System

• The move of the Centre for an electronic receivables discounting system would enable the MSMEs get nearly 80-90 per cent of the payment immediately. This would vastly improve their cash flow and financial health

Setting up of Payment Banks of Postal Dept

• We have to also appreciate the decision to use the enormous postal network in India with more than 1.50 lakhs points of presence across the nation through the proposed Payments Bank of the postal department. With its unparalleled reach, the bank would be able to serve even small and micro units located in remote rural areas.

Gold monetization Scheme, Customs duty cut, service tax exemption

The newly proposed • gold monetization scheme, • cut in Customs duty on 22 specified items, • service tax exemption for pre-cold storage warehousing

are welcome steps for MSME Sector, though this may slightly be offset against the marginal increase in central excise to 14 %

Start-ups and formation of a new National Skills Mission

• Another Rs. 1,000 crores for supporting start-ups and a new National Skills Mission to spur job creation.