Why 2019 promises to be the year of MSME Start-ups?

Last Updated at: Apr 06, 2020
Why 2019 promises to be the year of MSME Start-ups_

Due to demonetization and the introduction of GST, the industries in India faced a lot of challenges in recent years. Now, it looks like it will be favorable for the MSME (Micro, Small and Medium Enterprises). Here, you will be able to analyze the schemes introduced for companies in the MSME sector and how it will help new startups to emerge.

In the last two years, that represented challenges faced by industries consequent to demonetisation and introduction to GST, the year 2019 is likely to be a favourable year for micro, small and medium level enterprises (MSME). While cash crunch characterised the year 2017, lack of access to credit, fall in the value of rupee and increased compliance costs from switching over to the regime to GST added to the miseries of the small scale industries.

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This post analyses the recent schemes for the MSME sector and how these are likely to boost the emergence of new start-ups in this field while also strengthening the economic and market standing of existing enterprises.

The five sectors that can encourage micro, small and medium level enterprises.

Economists have observed that the top four operational and financial needs of small sector industries can be met by progress in the field of :

  • Accessible and economical credit opportunities
  • Enhanced access to market
  • Technology upgradation
  • Ease of Doing Business

We will now examine governmental and administrative framework aimed at necessitating growth in each of these designated parameters and how emerging start-ups can reap the advantages of the same.

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Accessible and Economical Credit Creation

The MUDRA Yojana that aims to create inclusive entrepreneurship targets lending to the tune of 3 lac crores to the small industries in the year 2018-19, where loans up to 10 lacs can be easily obtained. The 2018 Budget also allocated 200 crores to support small scale cottage industries manufacturing perfumes, essential oils and other associated products. The government has also put in place mechanisms for a 59-minute loan portal to enable easy access to credit for MSMEs. To further help enterprises meet operational needs, the government has created a Trade Receivables e-Discounting System (TReDS) – that enables entrepreneurs to access credit from banks, based on their upcoming receivables, and hence solves the problem of cash deficit in the working cycle.

Enhancing access to market

There is now a directive that mandates that all public sector enterprises must compulsorily purchase 25 percent of their inputs from MSMEs. The government is also aiming at enhancing Public Private Partnership in most sector of public importance. The most recent example is the relaxation offered to small private players in the area of defence equipment manufacturing, where on the basis of a license obtained by the Department of Industrial Policy and Promotion, equipment and there spare parts thereof, can be manufactured in India by small players.

Technology Upgradation

In order to enhance the cost-effectiveness and promote clean energy use in manufacturing, the government reimburses project costs towards these goals for MSME sector units and also expenditure incurred for implementation of clean technology, preparation of audit report and subsidies for licensing products according to national and international standards. Moreover, twenty technological hubs will be formed in the country for imparting technological training and boost innovation in MSMEs.

Ease of Doing Business

With the setting of NCLT and Special Commercial Courts, the process of getting commercial contracts enforced has been made simpler. Automation in GST filing and e-way bill is likely to reduce the time spent on compliances. Moreover, labour law returns have been reduced to just one filing every year and under air pollution and water pollution laws, both have been merged as a single consent and the return will be accepted through self-certification.

In the 32nd Meeting of the GST Council concluded on January 10, 2019, it has also been recommended to increase the composition scheme limit to 1.5 crores, the registration exemption for GST to 40 lacs and payment of GST exemption limit to 20 lacs. The government will also provide an Accounting and Billing software, free of cost to small taxpayers.

To summarize, you would have got to know the financial and operational requirements of the MSME industries from here. You will get to know how one can promote clean energy and cost-effectiveness in the MSME sector with the new schemes. Remember that the schemes will be beneficial over time if not instantly.

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.