DBS helps MSMEs with services such as business loans,
payments and collections, remittances and forex
The sector has always felt resource crunch. The
situation worsened because of the pandemic. Lockdowns
forced units to down shutters though the promoters still
had to pay a number of fixed expenses. This wreaked
havoc on small businesses.
Akash Gehani, COO & Co-founder, Instamojo, says a
complete halt in business activity made it difficult for
the MSMEs to service their obligations. Many had to
close shop permanently. A LocalCircles survey last year
had stated that at least 59% of startups and small
companies were likely to shut, scale down or be sold due
to the harsh impact of the Covid-19 pandemic.
In the Budget, Gehani says, the government should
consider addressing the credit gap challenge through GST
rationalisation and by reducing compliance burden for
ease of doing business. “The government should introduce
initiatives to manage existing credit by regulatory
sandboxes, compliance burden reductions and also
introducing more incubation programmes,” he adds.
Industry experts are of the view that the Budget should
address the challenges by improving the sources of
financing available for the sector.
Pallavi Shrivastava, Co-Founder & Director of Progcap,
which offers financing solutions for SMBs, says the
immediate requirement is to provide a lower cost of
capital to fund MSMEs’ business continuity needs.
“Increasing the ambit of priority sector lending network
to cover trading MSMEs, helping them borrow at a
competitive rate; rationalisation of tax liabilities to
enable more capital inflow in helping them improve the
business process, geographical expansion; and extending
credit guarantee schemes for the trading MSMEs thus far
excluded from policies/incentive schemes will be the
need of the hour,” she says.
At least 30% of the financial inclusion budget should be
allocated to the MSME sector, given that it accounts for
roughly the same contribution to GDP, Shrivastava says.
Impetus through innovative credit schemes and an R&D
input credit scheme to boost innovation among them are
some of the other measures she suggests for upliftment
of the small businesses.
But not just financial incentives, the sector also needs
to be cushioned from the impact of such a crisis in the
times to come. Long-term measures and policies that can
build resilience for such enterprises will prove crucial
to their survival and sustenance.
Ram Iyer, Founder and CEO, Vayana Network, outlines some
aspects that can foster an environment that is
comfortable and enabling for each stakeholder. “Ease of
doing business should be put into practice with uniform
laws across states. Besides this, simplifying GST rules,
undertaking initiatives to enable cluster-based access
to affordable credit and fortifying state-based MSME
support facilitation centres will all be steps in the
right direction for the sector,” he says.
Iyer adds that while these may be outside the immediate
scope of a Budget statement, such measures can be the
guiding force of the policy to protect small businesses
from external factors threatening its survival.
India’s success and growth as an economy will depend a
lot on how its MSMEs prosper. No lofty economic goal can
be achieved if small enterprises – the proverbial
backbone of the Indian economy – are left to fend for
Source::: THE ECONOMIC TIMES,