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Is MSME sector going to be the new game-changer?



Writers Vijay Sureka – partner – and Nusrat Hassan -Co-Managing Partner – at Link Legal India Law Services in Mumbai speak about the possibility of the MSME sector becoming the new game-changer and the role of Government of India in the same…

L to R: Vijay Sureka, Nusrat Hassan

L to R: Vijay Sureka, Nusrat Hassan

Much has been said about the micro, small and medium enterprises (MSMEs) in the past few months. And one thing that is becoming increasingly clear is that the Government of India (GoI) has started to take definitive and quick steps to address the challenges being faced by the MSME sector – the challenges that have seen the sector struggling to a large extent. So, is the MSME sector going to be the new supply chain for the larger industry?

The MSME sector is vital for the growth and development of any economy and its strategic importance cannot be overemphasised. According to some estimates, small and medium enterprises account for approximately 90 percent of businesses and more than 50 percent of employment worldwide. In fact, MSMEs have for many years been the backbone of the Indian economy as well, contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy.

There are more than 60 million MSMEs operating throughout the country across various sectors and contribute approximately 30% to India’s GDP and approximately 45% to the overall exports from India. The GoI has set itself a target of ensuring that MSMEs contribute more than 50% to India’s GDP and offer at least 150 million jobs over the next 5 years.

It is obvious that industry depends heavily upon the MSME sector. For instance, the MSME sector contributes 6.11 % to the countrys manufacturing GDP and a large chunk of MSMEs comprise the auto component sector. Further, according to the available data, in the Indian pharmaceutical industry about 60 percent of the manufacturing is contributed by MSMEs.

In fact, not just the private sector, even the GoI depends on the MSME sector to a very large extent.

The public procurement policy of the GoI mandates every ministry, department and public sector undertaking of the GoI to compulsorily procure at least 25% of their total annual purchases from the MSMEs. According to available government data, the total procurement by central ministries and PSUs form MSMEs during the financial year 2019-2020 exceeded Rs. 37,000 crore (USD 4.8 billion).

The sectors that saw the most procurements, included energy, railways, steel, mining, defence and heavy industries and public enterprise. Ministry of Petroleum and Natural Gas alone accounted for INR 20,000 crore (approximately USD 2.6 billion) and energy sector accounted for approximately INR 25,000 crore (approximately USD 3.33 billion).

With the recent announcement made by the GoI to disallow global tenders for government procurement of goods and services worth less than INR 200 crore (approximately USD 26.67 million) and the much needed push sought to be given to the infrastructure sector through the National Infrastructure Pipeline, which estimates an investment of approximately INR 111 lakh crore (approximately USD 1.48 trillion) in the infrastructure sector over the next 5 years, the MSME sector stands to gain tremendously.

Add to this the various financial measures announced by the Government as a part of the Atmanirbhar Bharat programme in the month of May 2020, and it is evident that the GoI means business. Additionally, significant labour reforms have also been proposed by the GoI to consolidate 44 central labour laws into 4 simplified codes, and some States have introduced labour law relaxations considering the ongoing COVID-19 pandemic for up to 3 years, each aimed at aimed at making the environment more conducive to doing business in India.

One of the biggest challenges being faced by the MSME sector is the issue of delayed payments. Most large corporates operate with MSMEs on a credit basis and often there are delays in payment of their invoices.

As a result, MSMEs face a financial crunch in the business. Their interest burden increases, cash flow becomes stressed and the ability of MSMEs to meet their financial obligations, including debt servicing, is severely affected.

Therefore, the likelihood of proceedings being initiated against MSMEs under the Insolvency and Bankruptcy Code, 2016 (IBC) becomes very high. However, the recent move to increase the minimum threshold to initiate insolvency proceedings under the IBC from INR 1 lakh (approximately USD 1,335) to INR 1 crore (approximately USD 133,335) is bound to bring some breather to the beleaguered sector.

Another seemingly small but significant step towards easing the road ahead for the MSME sector is the proposal of the Insolvency and Bankruptcy Board of India (IBBI) to permit the promoters and founders of a stressed MSME to present a resolution plan, should insolvency proceedings be initiated against the MSME. For the uninitiated, IBC prohibits promoters and other connected persons and related parties of a company against whom insolvency proceedings have been initiated, from proposing a resolution plan for the revival of the company.

The list of persons who are not eligible to bid for the distressed company is very wide. Thus, while many a times promoters are willing to revive the unit by pooling in funds from friends and family, the restriction imposed by IBC makes it difficult for promoters even in genuine cases to try and revive the company.
Accordingly, the proposed move by the IBBI to allow promoters to make a bid for their companies in the insolvency process is a step in the right direction which would encourage promoters to pool in their personal resources, in a bid to revive their companies and retain control at the same time.

In February 2020, the Indian finance ministry proposed setting up of an Investment Clearance Cell with the intention of providing ?end to end facilitation and support to create more opportunities and remove roadblocks in obtaining the different approvals required for various purposes.

The idea behind the proposed investment clearance cell is to give investors free investment advisory, land banks and facilitate clearances even at state level. The civil aviation ministry has already set up its single clearance window pursuant to the aforesaid announcement.

The other ministries are expected to follow suit soon.

The policy initiatives announced by the GoI are well calibrated and there is a visible effort on the part of the GoI to further ease doing of business in India, with special emphasis on the MSME sector. The GoIs mindset looks like it is recognizing the strategic importance of MSME sector and that the MSME sector could be the new gamechanger, especially in the post COVID-19 period.

With the tailwind of these government initiatives, favourable demographics and growth in the working-age population, we believe there is a huge potential for the MSME sector waiting to be unlocked in times to come. These reforms are intended to and indeed inspire confidence in the MSME sector, thereby creating an environment of positivity attractive enough for foreign investments to sit up and take a note of this sector, which they have so far ignored.

These sincere efforts of the GoI are bound to yield results and will certainly help the MSME sector not only to reinvent themselves and upscale domestically, but also to create a larger footprint across the globe.

While the GOIs efforts and various reforms are replete with myriad opportunities for the MSME sector, the proof, as they say, is in the pudding.
Thus, we will have to wait and watch whether and to what extent the GoI initiatives would yield the desired results and help in reviving the struggling sector.

However, there is no naysaying that the GoI has gone all out and made genuine efforts to pump life into the sector, and the GoIs efforts should be lauded wholeheartedly.

(Views are personal.) 

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Nagpur News

RMBRCN celebrates Charter Presentation & Installation, Rina Sinha becomes Charter President



The Rotary Means Business chapter of Rotary Club Of Nagpur (RMBRCN) celebrated their Charter Presentation and Installation of Board on September 17, 2023 in a crisp official ceremony at Hotel Centre Point, Nagpur.

Rotary Means Business encourages Rotarians to support the success of their fellow Rotarians by doing business with them and by referring others to them.

Charter President Past President Rtn Rina Sinha presided over the ceremony. Renowned entrepreneur and Rotarian Aspi Bapuna, Chairman of Bapuna Group, was the Chief Guest and  Rtn Namita Sharma, President of RCN, was the Guest of Honour.

The Board of Directors of RMBRCN include Rtn Navneet Jain, Vice President, Rtn Mohammed Master, Honorary Secretary, Rtn Sanjay Aggarwal Treasurer, Rtn Rakhi Bhatia Director Chapter Service, Rtn Rahul Shrivastava, Director Vocational Service, Dr Ruchi Choudhry, Director Membership Development, Ranjana Duseja, Director Attendance.

Past Rotary District Governor (PDG) Shabbir Shakir, Past Presidents- Bharat Goenka , Khushnoor Chugh, Sanjiv Chugh, Akhtar Parvez, Tejinder Singh Rawal, Alok Goenka,  Jerestine Watchmaker, Sandeep Dhodapkar, Sanjay Arora, President RMB Nagpur, and Behram Patel and Amitabh Sinha were present.

President Rina Sinha informed that within a short period of its formation already 48 members representing various businesses  have joined the chapter and the numbers are increasing . The Chapter has already crossed 5 crores of business amongst their members and RMB will further strengthen Rotary in membership growth and retention .

Chief Guest Rtn Aspi Bapuna lauded the chapter’s success and reiterated that its comfortable and safe to do business among fellow rotarians as all follow the Four Way Test of Rotary. Jerestine introduced President Rina. Aspi Bapuna  presented the charter and installed President Rina Sinha . Rtn Namita congratulated the RMB chapter and informed that this is the new initiative at RCN.The Board was installed by Rina Sinha and all members were installed by the Past Presidents. An exclusive digital Monthly Magazine ‘Growth Engine’ was launched by Editor Niharika Chugh Vali.

 Navneet Jain and Rahul Choudhry conducted the referral and thank you session where enthusiastic members informed about their successful business details. Nishchay Sinha launched the social media and MYRMB app which connects members to other chapters digitally, Treasurer Sanjay Agarwal gave treasurers report, Rtn Rakhi Bhatia managed the event. Rtn Parag Datey and Niharika were the Masters of Ceremony (MOCs). Secretary Mohammed Master proposed the formal Vote of Thanks .

Also read: Jayaswal Neco group celebrate BL Shaw’s 90th Birthday, 50th Founder’s Day in a huge gala event in Nagpur

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Nagpur News

Nitin Gadkari inaugurates double-decker electric bus availed for senior citizens in Nagpur



Minister of Road Transport and Highways Nitin Gadkari, on Saturday, inaugurated the double-decker electric bus designed for senior citizens in Nagpur. The initiative has been undertaken in association with Ashok Leyland’s CSR (Corporate Social Responsibility) Committee and Jyeshtha Nagarik Pratishthan.

Executive President of Jyeshtha Nagarik Pratishthan Datta Meghe, Vice Chairman of Ashok Leyland Limited Yash Sachar, CEO of Switch Mobility Mahesh Babu, and other dignitaries were present during the inauguration.

“I am very thankful to Ashok Leyland’s electric vehicle arm ‘Switch Mobility’ for donating an electric bus for our senior citizens. The bus can hold a capacity of 65 people and will benefit a lot to disabled and senior citizens,” Gadkari said.

“We already have a green Electra bus available to us for the past five to six years. Krishna Reddy has taken the responsibility of repairing and providing air-conditioning to the bus, moreover, he is providing us with one additional bus. A Tata Motor bus will be arriving this month as well, giving us a total of four buses to operate. This will solve the issue of waiting list due to the lack of buses for senior citizens in the city.” he added.

With the help of these buses, senior citizens can avail the benefit of free trips to religious places like Ambhora, Adasa, Shegaon, Mahur, Dhapewada, and Kalamb.

Also read: NMC confiscates 117 PoP idols, collects Rs 10,000 fine from seller


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Nagpur News

Nagpur: Married man accused of girlfriend’s rape commits suicide on Facebook live



A 38-year-old married man named Manish alias Raj Yadav, on Sunday, committed suicide during a Facebook live-stream after allegedly being accused of rape by his girlfriend and her family in Nagpur.

During the live stream, Manish, who was married and a father to three children, stated that his 19-year-old girlfriend, Kajal, along with her family members demanded a sum of five lakh rupees and threatened to press charges of rape if he failed to do so.

On September 6, the situation became grave as the woman’s family accused him of eloping after Kajal went missing from her residence.

The deceased refused the claims of having any sexual relationship with the woman and identified her, her family, and a photo studio operator responsible for his condition. He, then, jumped into the river.

After the live video surfaced online, Kalamna Police launched a search operation and recovered the deceased’s body from the river. Four people have been detained in the case for questioning. Further investigation is underway.

Also read: NMC confiscates 117 PoP idols, collects Rs 10,000 fine from seller

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