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Govt working on suggestions to create Rs 5k cr stressed asset fund: Secretary MSME Arun Kumar Panda

Issues around access to finance, lack of cutting edge technology and asymmetry of information are some of the primary issues Indian MSMEs today face.

, ET Online|
Updated: Dec 14, 2019, 12.50 PM IST
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"We are working towards skilling, upskilling and reskilling the workforce across sectors in the economy," said Panda.
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With the government betting big on the country's MSMEs sector in helping it reach the $5 trillion economy goal by 2025, Arun Kumar Panda, Secretary, Ministry of Micro, Small & Medium Enterprises, tells ET that the government’s vision is to ensure that at least, a contribution worth $2 trillion comes from the sector. The Secretary says a number of initiatives targeted at technological advancement, skill development and job creations are being implemented across various MSME clusters throughout the country. Edited excerpts:

ET: The Union MSME Minister Nitin Gadkari has made it clear that MSMEs would have to play a significant role in India’s $5 trillion economy quest. The Government's vision is to increase MSMEs contribution to GDP to 50%. Tell us about your vision and roadmap for the sector.
Arun Kumar Panda (AKP):
The Indian economy is likely to emerge as one of the leading economies in the world, with an envisioned GDP of $5 trillion economy by 2024. Our vision is to ensure that at least a contribution worth $2 trillion come from the MSME sector. To accomplish this, the government is working towards technological advancement, skill development and job creation through the large MSME sector. The Khadi and Industries Commission under the Prime Minister’s Employment Generation Programme (PMEGP) scheme has been successful in creating over 20 lakh jobs in the last four years.

Besides, the Ministry is proposing to set up 500 Entrepreneurship Development Cells (EDCs) in the next five years to provide a comprehensive range of customized support services for indigenous entrepreneurs. In addition to this, 100 Export Facilitation Centers (EFCs) will be set up in the next four years to integrate Indian MSMEs in GVC through requisite mentoring and handholding support.

The Ministry is also considering an amendment to the MSME Act to adopt a single definition of MSME to replace the multiple definitions and further uphold India’s position in the ease of doing business indices. The government and the private sector player are working hand in hand to encourage larger FDI investment in the MSME sector. Going forward, the Indian MSMEs will have to be a part of the global and regional value chain to be able to catalyze further growth into the economy.

ET: According to you, what are the three main structural problems affecting the growth of Indian MSMEs that the Ministry would like to focus upon in coming times?
AKP:
The Indian MSME faces multiple challenges – out which is access to finance, cutting edge technology and asymmetry of information are some of the primary ones. The MSME Ministry is currently focused on improving the MSMEs access to financial help in their technological advancement.

Recently the RBI report chaired by U.K. Sinha suggested a Rs 5,000 crore stressed asset fund be created for domestic MSMEs where the change in the external environment has led to many MSMEs becoming non-performing assets (NPAs). The Committee has also suggested a government-sponsored Fund of Funds (FoF) of Rs 10,000 crore be created that will support crowdfunding from venture capital and private equity firms in the MSME sector. We are working towards following these suggestions and restoring the financial health of the MSMEs.

In the technological front, the government is also working towards advancing 18 Tool Rooms through the Technology Centre Systems Programme (TCSP). The TCSP programme will help in advancing manufacturing technologies and skilled manpower across the country.
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The proposed EDCs and EFCs as mentioned earlier will be important centres for information dissemination at the grassroots level. The EDCs, in particular, will work as one-stop shop for entrepreneurs at the district level and help them start and expand their business.

ET: Is the Ministry satisfied with Make in India and the progress made under it? What is being done to take the scheme to the next level?
AKP:
The Make in India initiative has made a significant stride in advancing India’s manufacturing sector. FDI in India has followed a positive trend since the launch of the Make in India. For the first time, India has crossed the $ 60 billion mark in FY 2017 -2018 in FDI due to the investment-friendly policies and opening of FDI allowance in various sectors. India's ranking on the infrastructure pillar of the Global Competitiveness Index has improved by three places to number 63. India has also improved its ranking in the global innovation index by five places and reached 52nd position this year from 57th last year. Most importantly, India’s rank in the Ease of Doing Business has jumped 65 places to currently stand at 77.

Having said this, it is important to mention that a lot more needs to be done to uplift the MSME sector in a country like India, where a large population of youth are entering is the job market every day. Multiple ministries across sectors are working hand in hand to accelerate growth through India’s manufacturing and services sector. Very recently, through a historic move, the government has announced to reduce corporate taxes for domestic and new manufacturing companies. This will further boost the production of Indian enterprises. In the immediate run, this will help the hard-hit auto sector and help in boosting demand from the economy.

The government has recently announced channelizing CSR funding to support research and incubation in PSUs. Such a step will help in improving research facilities across institutes in India and further boost India’s competitiveness in the global market. The government - whether it is finance, MSME, commerce or infrastructure are taking progressive steps to Make In India a success story and the policy changes are a testimony to this fact.

ET: Labour, land laws, regulatory and compliance-related bottlenecks hurt the informal sector (dominated by MSMEs) the most. Please tell us about your efforts to ease this.
AKP:
The MSME sector required skilled labour to move up the value chain and produce a diverse set of goods from the domestic markets. We are working towards skilling, upskilling and reskilling the workforce across sectors in the economy. The labour laws in the country can help ensure the labourers earn a minimum income– which is currently not the case in terms of contract workers. The need of the hour is also to adopt better management practices to reach optimum utility in production.

In terms of regulation, we have come a long way since the license permit raj era. India has been doing fairly well in the ease of doing business indicator. We are striving to ensure that the systems and processes in running or starting a new business become easier in this country. Digitization in accessing various services, use of UAM, Aadhaar and GST are all positive steps towards this direction.

ET: ILO believes Indian laws incentivize firms to remain small. Your thoughts.
AKP:
Labour Laws in India aim to reduce compliance on the part of small firms. However, this should not be a disincentive to grow big as the required compliances should help in bringing more workers into the formal system. The ILO report and interview also clearly mentioned in its summary statements that when the benefits of becoming a formal sector enterprise outweigh the cost, the levels of informality in an economy are going to go down.

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At the Ministry, we are working towards increasing the benefits of formalization through various financial and business incentives. As you might be aware, the finance minister has already announced a pension scheme for retail traders and shopkeepers through the Pradhan Mantri Karam Yogi Mandaan during this year’s budget. We aim to introduce many such moves which can secure the lives of entrepreneurs and help them expand their business by entering into the formal sector. The aim is not merely to bring them under the government’s regulatory ambit, but help them reap real-time economic benefits of entering the formal economy.

ET: In its bid to reach the 5-trillion mark, the Government wants MSMEs' exports contribution, which currently stands at 50% from the sector to reach 75%. Please tell us about the Ministry's roadmap to achieve this.
AKP:
The government is working towards increasing diversity in the production of manufactured goods and services. We are also working towards better standardization and benchmarking of manufactured goods – so that we can easily integrate into the global markets and increase sales.

The Ministry is also working towards creating a Global Market Intelligence System, which is a one-stop portal for all the export related information for MSMEs. It will be a platform to improve trade facilitation by providing export market intelligence and will democratize and simplify the use of global export data. It will also be linked organically with the Export Facilitation Centre and Enterprise Development Centre to provide handholding support - something that is required at the ground level.

ET: With climate change affecting world economies, a push for sustainable manufacturing is a buzzword these days. At a time when MSMEs are already reeling under a severe fund crunch, how can they even think about Sustainable Manufacturing? How can the Government create financial elbow room for MSMEs in this regard?
AKP:
Yes, it is true that sustainable manufacturing is a buzzword as most countries are trying to reach the SDG Goal 12 targets towards sustainable consumption and production patterns. But, one must understand each country has its own developmental pathway and is trying to integrate sustainability within its existing policy framework.

The Ministry of MSME has introduced the Zero Defect Zero effect policy under which there are several incentive structures for manufacturing industries who abide by the environmental norms and cause zero waste of natural resources. The government is also working towards creating alternate investment funds, which focus on the development of socially and environmentally conscious businesses.

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MSMEs key component of India's $5-trillion economy quest: Arun Kumar Panda, MSME Secretary

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