MSME minister Kalraj Mishra: Only micro, small and medium businesses can provide maximum jobs, entrepreneurs and products for India

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Micro, small and medium enterprises (MSME) account for over 37% of India’s GDP and a major chunk of employment. In an effort to push this segment as an engine of growth, the government recently launched an online portal and mobile app for tracking data from business-related schemes and to monitor delayed payments to small businesses from public sector undertakings. Kalraj Mishra, Cabinet Minister for MSME, spoke to Nalin Mehta on the initiative, issues of compliance with state governments and why it is crucial for fulfilling the Modi government’s promise of job creation:

You have recently launched a phone app and portal for information on schemes on MSME and asked state governments to simplify compliance procedures for small businesses. How important are small businesses?

If MSME is pushed forward then our GDP can increase substantially. Only on that basis can we turn into a developed country because after agriculture, small businesses account for the biggest share in the economy. MSME constitute 45% of manufacturing, 42% of exports and over 37% of GDP. There are over 7,000 manufacturing products produced by small businesses and employment generation so far has been more than 11 crore. Only MSME can provide maximum jobs, maximum entrepreneurs and maximum products: for domestic use, in the global arena or for defence. Only through this can one develop more as a nation.

Today we have more than five crore companies in this sector –registered as well as unregistered. If we can organise them into clusters then we can create a good situation. For example, for traditional artisans, we had had many schemes from earlier such as Sfurti (Scheme for Fund for Regeneration of Traditional Industry). For many years, there were hardly 15-20 Sfurti clusters in India. We consolidated old schemes and gave new focus. The result is that today we have more than 49 Sfurti cluster areas and 71 more are in the process of being created.

How different is your government’s approach from previous ones?

First, our focus is on industry clusters. Second, we have put attention on spending money primarily towards construction instead of all over the place once studies are done. Third, for greater transparency we have made everything online.

Earlier, it was very difficult for people to register their businesses. We started Udyog Aadhaar Memorandum (UAM) in 2015 and now an entrepreneur can enter all relevant information online. You click on it and within five minutes you can get your registration without any documentation and with self-certification. From 2006-15, only about 21.9 lakh companies had been registered. From September 2015 to today, over 30 lakh new registrations have been done. This is huge.

Why are so many small businesses unregistered compared to those which are registered?

Historically, the number of registered small companies has relatively been very low, compared to unregistered ones. Of our estimate of total five crore companies, less than one crore are registered. The unregistered ones still pay sales tax so we can estimate their size.

How will you get these companies to register?

We do provide tax-paying companies services but can’t provide them benefits of important schemes. This is why we are making it all online so more and more people come in and benefit from our schemes. This is one of the reasons for launching the mobile app.

How does focussing on small businesses square with the aims of the Make in India initiative?

Fulfilling Make in India and making India a manufacturing hub is a key aim for us. MSME entrepreneurs have the biggest problem in getting loans. Up to Rs 1 crore collateral free loans per unit were allowed earlier. The PM, through a cabinet decision, increased that loan limit to Rs 2 crore for a person without any third party guarantee. We pay for that through the Credit Guarantee Trust Fund Scheme. Our government increased the corpus for this fund by Rs 5,000 crore, increasing it from Rs 2,500 crore to Rs 7,500 crore. This is a new initiative so more and more companies can take loans.

But how much role can government play beyond easing regulations?

There was a 2012 law according to which 20% of purchases by public sector undertakings at the Centre and in the states must be from small businesses. It was not happening in practice and we made it mandatory from April 1, 2015. Under procurement, we are focussing in defence in a big way and monitoring implementation closely. Out of this 20%, 4% purchases have to be from SC/ST enterprises.

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