The Union Finance Minister Arun Jaitley announced a slew of measures to boost the morale of small and medium enterprises (SMEs) in the Budget, including a Rs 10,000 crore start-up fund for new businesses and an investment allowance of Rs 25 crore. Touching upon goods and services tax (GST), the FM also announced the setting up of national accelerators and incubators, Rs 100 crore agri-infra fund, revision of the definition of SME for higher capital infusions, Rs 100 crore for startup village entrepreneurship, Rs 200 crore for scheduled caste entrepreneurs, increase in non-taxable personal income by Rs 50,000, young leaders programme at an investment of Rs 1,000 crore and Rs 500 crore to set up software services in rural areas.
Many measures announced by the FM should make a positive impact on the SME sector. The 30 million strong SME sector caters to several industrial verticals. Touching almost every part of life, SMEs are considered to be the backbone of economy and contribute 45 per cent of the industrial output. They contribute 40 per cent of India´s exports, and employ close to 60 million people. Creating 1.3 million jobs every year, SMEs produce more than 8,000 quality products for the Indian and international markets. Also playing an important role in the equipment sector, they account for over 70 per cent of the sector. May it be a humble fastener that finds use in a tractor, or a complex mechanical sub-assembly, which forms part of a major assembly in an excavator, SMEs are there.
Their presence is however connected directly with their financial abilities and manufacturing capabilities. This also makes them more vulnerable to interest rate fluctuations and labour issues. The Budget did not touch on either. It may not have been the right forum. Initiatives by the government in these two important areas of concern for SMEs will prove to be the right forum. Help SMEs to boost their capabilities, help them better organise their resources and move up the value chain, and deliver better value. Since SMEs are known to seek finance from many institutions other than National Bank for Agriculture and Rural Development (NABARD), the need is to help them avail finance on easier terms, and at attractive rates. Linking the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) to the SME sector may address the issue of labour shortage to an extent. With the changing needs of the industrial verticals SME sector serves, it is essential that they have easier access to labs and similar such supporting infrastructure. There is also a need for better connectivity between industries and the academia. And not just at the level of big enterprises, but also at the level of small and micro enterprises.