Dr. P. K. Vasudeva, Chandigarh

MSME NEEDS CONTINUED SUPPORT
The MSME sector needs continued supports from the government as it is still fighting hard for it's survival after griped under global recession.
MSME units comprise more than 90 percent of the total business enterprises in the country - spread both in organized and unorganized sectors. The growth and development of the sector is, therefore, of paramount importance for overall development of the Indian economy.
The key initiatives could be to reduce the overall tax burden to stimulate manufacturing, encourage R&D through initiatives such as providing tax benefits, and setting up an industry focused R&D centre.
The industry expects good support from the government in the expected budget. The corporate tax rate should be lowered to 30%, in preparation of the Direct Tax Code (DTC) prescribing a 25% rate.
The government is also expected to put in place structural reforms in the areas of infrastructure, encouraging greater private participation, subsidy rationalization and labour laws. Certain incentives should also be given to the SME and export sectors as both have been affected by the global downturn. The sector requires the continuous financial support from the government in order to achieve sustainable growth, which could be achieved through establishment of specialized MSME banks and encouragement through provision of fiscal incentives to banks and the Non Banking Financing Companies (NBFCs) to lend more to the MSME sector.A small and medium entrepreneur wants faster credit and regular demand for its products. Even if these are at no special terms, a small business must not be denied the opportunity to have access to finance because it is small. MSMEs contribute almost 45% to all industrial activity. It is hoped that the Government will reserve 20% of all credit and 20% of all public procurement for small businesses. US has almost 60% of credit going to the small business.
The ministry of MSME has asked the Finance Minister during the pre-budget recommendations on January 29 to extend the existing stimulus package for MSMEs. They had asked the centre for the extension of 'stimulus package', which were specific to MSMEs, for a further period of one year, beyond March 31, 2010.
The Task Force panel had also recommended creating a separate fund with SIDBI, using the shortfalls, if any, against the micro and small enterprise (MSE) credit targets set for the commercial banks. This fund named 'Special Fund for Micro Enterprises' should be utilized exclusively for lending to the micro enterprises.
According to the report of the MSME Task Force, the sector contributes 8% of nation's GDP, 45 percent of manufactured output and 40% of India's exports; the sector is employing around 6 crore people and a major participant in India's economic progress.

Dr. P. K. Vasudeva,
Senior Professor, (Teaches Financial Strategy)
Icfai Business School,
Chandigarh
9872219765 (M)
vasu022@gmail.com