The Micro, Small and Medium Enterprises (MSMEs) sector’s growth and employment generation capacity is high. In the last fiscal, it grew about 11% and increased employment by 14%. Its contribution to the export market is also considerable. At times, many MSME units go in for innovation of products. Actually, innovation is a part of a MSME’s life cycle and is necessary for its health and vitality. Some of these units reach such high levels of innovation that they can be easily categorised as start-ups. But it is claimed that whatever be the status of innovations, an MSME unit cannot get the status of a start-up. This means the financial and economic benefits that a start-up unit can enjoy are beyond the reach of MSME units. This makes it difficult for MSMEs to innovate extensively.
Financial benefits of a start-up
Start-ups are generally new initiatives and are mostly technology driven companies with high growth potential. A start-up should not be older than seven years and its annual turnover should not go beyond ` 25 crore. It works towards innovation, development or improvement of products or processes or services. The government has an active role in helping the start-ups financially. Patent cost is high for a business unit. But in case of start-ups, an existing provision for 80% rebate on patent cost is aimed at helping start-ups in patenting their products. In case of registration, start-ups get several benefits. There are certain income tax benefits for start-ups as well.
The MSMEs do not get any of the benefits that are extended to start-ups. However, if these benefits are to be extended to the MSME sector, it is likely that the sector will gain immensely. This will pave way for better employment opportunities, economic growth and social development.
Business body’s anxiety
Sources from the Bengal National Chamber of Commerce and Industry (BNCCI) have aired their concern regarding the state of things in the MSME sector. The industry body has recently discussed the matter in its ‘MSME Committee’ meeting. BNCCI notes, “In India, the government is doing a lot for promotion of start-ups by extending certain benefits. But an MSME unit does not enjoy any such benefit in case of changes of scale of production.” It noted, “During tender processing, MSME units are not getting any benefits as a start-up. Tender Inviting Authority (TIA) is rejecting tenders straight way mentioning that the items are not listed in MSME scores.”
Arijit K. Mukherjee, Managing Director, IFP-India Private Limited and a member of BNCCI, said, “We have already brought the matter to the notice of the respective departments of the Union and the state government. But as of now, we have got no positive signal from any one of them.”
Economic slowdown and the MSME sector
The Indian government plans to lift its economy to reach the $5 trillion mark by 2024. For that, it requires a high level of saving and investment. It is known that level of savings and investments in India is now around 30%.
To achieve the stated target, the GDP should grow at 8% continually for five years. Additionally, it should be noted that to achieve the targeted growth, MSMEs must have a big role to play. The MSME sector should be given some benefits which will aid its development.
However, the present situation is not conducive for the growth of the MSME sector. Recently, the Automotive Component Manufacturers Association (ACMA) said that around 10 lakh jobs could be on line if the prolonged slowdown in the automobile industry continues. The body is seeking government intervention that includes reducing GST rates to increase demand for cars. At present, the GST rate on auto parts is 18%. It is known that almost the entire auto part making segment falls under the MSME sector. However, it is not only the MSME segment that is in stress. Many MSME players are in deep trouble with institutional credit drying up. The government needs to act fast to mitigate this crisis.