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2010-02-22

SMEs await Budget 2010

Everyone associated with the SME sector is experiencing the pre-budget jitters

While India Inc is guessing whether the stimulus package will continue or not, the micro, small and the medium enterprise (MSME) sector is wondering what Finane Minister Pranab Mukherjee will have in store for them in the Union Budget 2010.

 

With the Prime Minister’s Task Force submitting its report less than a month ago the expectations are even higher. The industry expects the budget to facilitate companies to retain more funds that can be reinvested for modernisation and expansion.

 

“We want the budget to be entrepreneur friendly. Ideally we look for lower taxation. Building a company requires a lot of funds and the taxes take away a lot from reinvesting profits into the business. A tax holiday of 3-5 years will help entrepreneurs deploy some of the resources earned back into the business,” says Rajiv Kumar, the founder and the CEO of RokeTalk.

 

Similar is the demand of the IT industry. As the industry is recovering from the effects of the economic crisis it has high expectations from the budget. The industry believes that the budget should provide parity between units under STPI scheme and the special economic zone (SEZ) scheme, said Sangeeta Gupta, vice president, Nasscom.

 

Summing up the expectations of the MSME sector, Rajeev Karwal, Foudner Milagrow Knowledge Solutions, a venture catalyst says, “There are two needs that the budget should address, first on credit side, second on procurement side. On credit side the government of India should encourage lending. Presently, it does lend 40 per cent to the priority sector but there is no fixed percentage of it reserved for small and medium enterprises. We believe that the government should specify 20 per cent of the lending to the SME sector. At present the share allocated to SMEs is around 8-10 per cent while their contribution to industrial output is 45 per cent. The US allocates 60 per cent of its budget to its SME sector. India should also reserve banking credit for the emerging sector.”

 

Talking about the procurement side Mr Karwal said that 20 per cent of the procurement of the PSUs should come from the MSME sector.

 

What has the ministry of MSME recommended to the finance ministry for the sector? When asked Madhav Lal, Additional Secretary and Development Commissioner, Ministry of MSME, Government of India said, “We have been interacting a lot with the other ministries regarding the suggestions of the task force over the last few months. And the government knows what the MSME sector requires.” Regarding the ministries suggestions he said, “The suggestions of the task force recommend the views of the ministry.”

 

Earlier, the task force for SMEs has suggested a host of reforms to be brought about for the development of the sector in the report it has submitted to the Prime Minister. The suggestions include the extension of the period for stimulus package, stipulating targets of lending by commercial banks; additional public spending to the tune of Rs 5,000 -5,500 crore over the next three to five years to specifically target deficiencies in the existing infrastructure; helping them in procuring technology and promoting incubation in educational institutions. It has also demanded the establishment of a Prime Minister's Council on micro and small enterprises in the Prime Minister's Office to oversee the implementation of the recommendations in the report.

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