‘Special attention for MSMEs, cut in customs duty needed as firms attempt to recover after third wave’

As per the recently announced early projections by the NSO (National Statistical Office), this financial year, India’s GDP is expected to grow 9.2% year on year compared to a 7.3% contraction last year following the disruptions brought by the pandemic. It would make about 1.4% growth in real GDP compared to the pre-pandemic financial year FY 19-20. There is undoubtedly a significant recovery over the year, but some sectors like MSMEs and contact-based services are yet to catch up. The monthly economic survey of Pune-based companies also highlights this. Over the 21 monthly surveys of about 150-200 companies, it is evident that smaller companies lag in recovery compared to the larger ones. The third wave has undoubtedly added to the woes. Before the third wave, the surveyed MSMEs expected full recovery by March-end. However, after the onset of the third wave, their responses changed to full recovery by May-June, on average.

What are the main concerns you would like the Union Finance Minister to address in her Budget speech?

We expect a growth budget with 9% or above growth. Thanks to all the interventions in the last year, we are on the recovery path. Hence, we must start on the gliding path of fiscal consolidation, i.e. reduce the fiscal deficit from this year’s 6.8% to about 5.8% and then, over the next 3-4 years, take it to the ideal FRBM limit of 3%.

The Budget must provide more capital expenditure for infrastructure development as it would help create a multiplier effect, boost consumption and create jobs. Like last year, it should also increase by about 25% from Rs 5.4 trillion to Rs 6.9 trillion this year. The Budget must also support high employment creating sectors like MSMEs and housing to enable employment-led growth.

Given the sluggish recovery of MSMEs that contribute to 30% of India’s GDP, they require special attention. MSMEs expect the successful scheme of credit guarantees to continue, albeit requiring lesser allocation than last year. The non-credit schemes like technology upgradation and quality assurance must pick up pace with adequate budget allocation. The departmental Budget must be increased from sub Rs 5,700 cr (other than the ECLGS component) to fund these schemes.

The policy announcements of TReDS and GIS digital pipe linkages to resolve delayed payments and further continued Ease of Doing Business would be very welcome.

What are the Pune-specific demands?

As Pune houses tens of thousands of MSMEs, these announcements would also help Pune. The national allocations towards capital infrastructure must find sufficient further allocation to Pune, the district that contributes the highest in the country to engineering goods exports. It is also the district that houses the largest city in the country that is not a state capital and hence is devoid of the deserving attention. The consideration should include air, road, and rail infrastructure that would serve Pune and many adjoining districts.

Pune’s MSMEs complained about rising steel and iron input costs. Can the Finance Minister address this concern?

Indeed, skyrocketing raw material prices have impacted most MSMEs by reducing their already thin margins and, thereby, questioning their sustainability. Many MSMEs have suggested a reduction in customs duty, and that’s something the FM can consider and announce.

What do you think the Budget should address in the start-up space?

India has the third-largest number of start-ups in the world. With 90 unicorns, India also has the third-largest number of unicorns behind the USA and China. Start-ups are innovating products and services and creating jobs. They need continued support like ‘Fund of Funds’, an extension of tax benefits and rationalisation of capital gains tax on unlisted start-ups. It currently stands at twice that of listed companies.

The Budget should make a specific allocation for supporting start-ups that develop cloud-based pay-per-use solutions for MSMEs in the B2B space. It will undoubtedly catalyse the sector contributing 30% to India’s GDP and providing more than 90% of jobs in the industry.