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Budget Expectation (SME Sector)

from Mr. Manish Bang, Director, Expanza Access Ltd

The SMEs are recognized as the most important element in industrial growth and GDP growth of the country. As there are 13 million SMEs in India contributing to 95% of industrial units and producing 45% of the total output. Being small there are many challenges which they face in the business and once they are taken care then they have ability to grow big. The growth and development of the SME sector is of paramount importance for overall development of the Indian economy, especially to counter the stiff competition from our neighbouring country i.e. China.

For this following are the suggestions to be considered in the coming budget FY10-11:

Higher interest rate is always a big issue for SMEs. SMEs are always charged 3-4% higher then what is charged to large corporate by Banks. Few large SME-dedicated banks (Indian or foreign) should be allowed to be established to facilitate greater competition in the SME space. Lower Interest rate should be provided by these banks.
The government started CGTSME scheme where loan upto 1cr can be given to SME without collateral. The response from the banks is so lukewarm that this scheme is near non-existence. Government must instruct banks to provide a threshold amount under this scheme to SMEs. Also create SME funding as priority sector funding.
SMEs should be able to easily access risk capital through angel/venture capital and private equity funds. In this regard, SME exchanges/ platforms that which were recently allowed by Sebi can play a crucial role if some fiscal incentives could be provided to mutual funds/FIs to invest a small percentage of their portfolio in SME exchanges. The government should also ask banks to start venture funds for SMEs in order to create risk capital.
Government must initiate marketing support for SMEs so that exports can be developed by SMEs. Similar to import support agencies like STC and MMTC, the government should start marketing supporting agencies for SMEs.
SMEs may be allowed tax exemption for the profits ploughed back into the business so as to promote capital investments & hence the growth for the industry.
It is stated that the excise duty exemption continues to be relevant for many products. Given their small size and informal nature, such enterprises find it too difficult to comply, but are ready to bear the cost burden by not availing set-offs. In view of the rising raw material costs in the last three years, the government may take a sympathetic view on enhancing the exemption limit for excise and service tax. The exemption limit must be increased from Rs.1cr to 3 cr.
All refunds from the government departments must be priorities for SMEs like refund of excess duty paid, VAT refund, Income Tax refund, TUF subsidy for textile etc. This money an be utilized by SME as working capital to enhance their business.

Given proper infrastructure and resources Indian SMEs can add big contribution in industrial output and Indian GDP.

About Expanza Access Ltd:

Expanza Access Limited is India’s only consultancy firm offering holistic solutions to the SMEs across various verticals. It helps SMEs to overcome the growth limitations by offering new business structure, human resource related issues, fresh capital and more resources. The company acts as a one-stop arena for all kinds of requirement of an SME. The company helps Indian SMEs to reach next level in the businesses through its holistic consultation in New Age Leadership Skills, Modern Business Structure and Systems, Larger Capital Base, Access to Debt Funds, Awareness of Global Trade & Trends, and Opportunities for Joint Ventures, Mergers & Acquisitions, etc.