Promoting manufacturing exports is needed to spur MSME growth: Assocham
Providing Indian MSMEs a better visibility to other countries with a better buying potential will be key to greater success.
Economic Times (ET): What kind of initiatives is Assocham involved in as an industry association to uplift MSMEs and what are the plans for the current fiscal in this domain?
Manguirish Pai Raiker (MPR): Assocham is involved in a number of initiatives aimed at benefiting the MSMEs. The objective is to strengthen the industry by highlighting the various issues faced with the Government and other organisations and suggesting feasible solutions. We have been working for the development of MSMEs from manufacturing, service sectors and allied industrial and business sectors for the last several years.
There are a number of programmes and MSME meets organised to bring all stakeholders on the same platform and create linkages for fostering growth and development in this sector. The role of the chamber is to constantly strive towards helping the business community meet various challenges and shape the path forward and assist in its growth. One of the major issues and challenges faced by MSME entrepreneurs is the inherent lack of awareness about various schemes available to them, for which we try to reach out through our various communication systems. We also try to overcome the various challenges being faced by MSME entrepreneurs.
ET: How can a change in labour laws and control of elevated logistic costs help to up the development of the MSMEs?
MPR: A lot of micro and small sector enterprises are unable to sustain the overwhelming increase in logistics’ costs. Aspects such as improving safety laws wherein shippers and logistics’ providers realise safety standards and ensure that warehouse operation is safe. Accountability and mandatory safety training can help reduce the losses. The focus should also be on the use of systems and tactical technology. The labour management software systems can help manage work in the warehouse and reduce overhead losses, implementation of the preventive maintenance technique and an effective transport management system. Connectivity should be improved by accelerating the completion of announced infrastructure projects. In particular, we should introduce flexibility in labour provisions across sectors. All state governments should speedily implement fixed-term employment that has now been extended to cover all sectors.
ET: What direction do you feel should the new FTP take when it is unveiled in 2020?
MPR: We expect the new FTP to be aimed at easing the regulations and helping to promote exports. MSME is termed as the driver of growth and exports are termed as the engine of growth - we expect government to promote manufacturing exports which has enormous potential for employment generation as well as has revenue growth. Positive measures in this direction will help MSMEs get a boost if some specific provisions benefitting this sector are included. The right direction can also switch the third party manufacturing of new innovative products to MSMEs from our country.
The full rate of import custom duties due to removal of GSP has increased the cost of imports and is making products of Indian origin expensive and highly uncompetitive in the US market and this has become a major setback to all the Indian exporters. This is affecting the trade of both countries. This needs to be addressed and steps should be taken to make exports competitive.
Goods imported by the US under the GSP route falls under "industrial supplies" - which implies withdrawal of GSP benefit can potentially raise the cost of production of domestic industries in the US. Some of the exports from India could be more expensive to US importers, who would potentially substitute Indian products with products from alternate sources at cheaper prices. This "substitution effect" will see India lose some significant business.
ET: What hopes do you have from the new government for support to scale up the MSME sector?
MPR: There needs to be further strengthening of the implementation of single window clearances to MSMEs. Developing and building access to global markets is crucial too. Providing Indian MSMEs a better visibility to other countries with a better buying potential will be key to greater success. An impetus to MSME sector can be looked at coupled with benefit to taxpayer by additional exemption of Rs. 50,000 under the Income Tax Act by encouraging them to invest in MSMEs.
ET: What steps in your view can be taken to give manufacturing the much needed thrust in India?
MPR: Import substituting products, which attract new investments for manufacturing in India, should be kept outside the ambit of free trade agreement. “Single window” system in all states that provide a single point of contact between investors and government and facilitates all required licences and approvals should come by. What can also make a qualitative difference is harmonising Indian quality standards with global practices across sectors.
The gradual simplification of GST structure aiming for dual rate slab i.e. 8% and 16% should be considered. Encouraging industries to invest in adopting digitisation of operations by giving interest or capital subsidies on systems and equipment as well as creating manufacturing related working labs across the country with 3D printers, software and computing power are some other important areas that can bring in the requisite changes.