Independence Day: What Indian MSMEs need freedom from after 74 years of independence

Currently, only Delhi and Mumbai are under the purview of the Ease of Doing Business report by World Bank but Kolkata and Bengaluru are likely to be included in future reports. (Representational image: Reuters)

Ease of Doing Business for MSMEs: Indian MSMEs have been a resilient lot. They have managed to struggle through innumerable challenges to an extent and remained steadfast in their role as the backbone of the Indian economy and the second-largest employment provider after agriculture. While Covid proved detrimental for multiple enterprises as many had reportedly shut down businesses temporarily or narrowed their operations, business activity was largely resumed across multiple sectors post the second wave of the pandemic. Even as Covid is one crisis everyone including MSMEs would want to get rid of, here’s what small businesses today want freedom from as India celebrates its 74th Independence Day this Sunday.

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The awareness around making entrepreneurship the de facto career path has increased. As a result, entrepreneurship-related programmes are now part of many business schools’ list of courses offered. However, MSMEs want a fundamental shift from the job seeker mindset to the job creator mindset among students at the school level in order to create more entrepreneurs. “Unless new entrepreneurs come up, how will industries expand and grow. Existing businesses will continue to operate in a family-run manner, but how will new enterprises come up at an exponential rate unless you change children’s mindset right at an early age. Hence, entrepreneurship should be a mandatory part of the school curriculum otherwise in the current state, the majority of people will continue to get into jobs. This mindset needs freedom,” ML Dhawan, Managing Director, Dhawan Enterprises and National Vice President, All India Confederation of Small & Micro Industries Associations told Financial Express Online.

While changing mindset is critical, but probably among the least discussed challenges faced by MSMEs is protests, rallies, or demonstrations either by a particular sect or political parties on roads, highways, or railway tracks. While one might argue it to be a temporary challenge but for MSMEs, it has gradually turned out to be among more pressing issues that need a permanent solution.

“Biggest independence we need is from demonstrations like Kisan Andolan, Shaheen Bagh protest, etc., that severely impact the movement of raw materials and finished goods for exports. This blocks access to industrial areas of a region as trucks remains stranded for days or they have to reroute their journeys. While protest is a fundamental right of everyone but that should not be allowed at the cost of the industry. During recent protests, we faced labour challenges as well. Hence, no state or national highways or railway tracks should be blocked by any demonstration,” DP Goel, Managing Director, Conquerent Control Systems, and Co-Chairman, MSME Committee, PHD Chamber of Commerce and Industry told Financial Express Online.

Another area of concern is the delay in settling commercial disputes in India. While the government had launched an exclusive Enforcing Contracts portal in June this year to improve the contract enforcement regime and provide access to a repository of commercial laws for ready reference, it has been among major deterrents for MSMEs and other businesses to focus on the growth of their businesses.

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“India ranks lowest in the Enforcing Contracts indicator of the World Bank’s Doing Business report that measures the time and cost for resolving business disputes. As an entrepreneur, it takes a tremendous amount of effort and energy to ensure suppliers deliver on time and buyers pay on time. While this seems basic professionalism but this culture is not normalised in the informal MSME landscape even today. This Independence Day, I wish for freedom from delays in obtaining Enforcement of Contracts through the judicial system,” Ashok Saigal, Managing Director, Frontier Technologies and Co-chairman, CII National MSME Council told Financial Express Online. Currently, only Delhi and Mumbai are under the purview of the Ease of Doing Business report by World Bank but Kolkata and Bengaluru are likely to be included in future reports.

While lack of solutions around solving capital crunch and transparency in schemes and services of government departments are among challenges MSMEs have always decried, now it is also the speed at which processes are executed that requires deeper focus. “Working of MSMEs must be made very flexible. Export freight rates are over five-six times currently which means overall investment for MSMEs has also shot up to very high levels. The government is yet to start the Remission of Duties and Taxes on Export Products (RoDTEP) scheme as it has already been several months since it was approved. So, the speed at which government rolls out policies needs to be improved, that’s freedom for us. You cannot put exporters on hold. There should be an MSME relationship manager similar to a banking relationship manager,” Rajan Nair, who owns freight forwarding company Alltime Shipping told Financial Express Online. 

Speaking at a CII event on August 11, 2021, Commerce Secretary BVR Subrahmanyam had said that tax refund rates for the RoDTEP export scheme are likely to be notified by August 13. The scheme, which was approved by the Union Cabinet in March last year, replaces the Merchandise Exports from India Scheme (MEIS). 

“Bureaucracy is at every level and it is difficult to describe the challenges but as entrepreneurs, we understand that it is a part of setting up and running a business. As raw material prices for many products have increased, the working capital requirement has also grown significantly. Banks are reluctant to lend under schemes like ECLGS as they say the MSME accounts will be considered restructured and that it would impact businesses’ credit rating as well. Moreover, government payments are delayed for five-six months. Around Rs 5-6 crore of our payment is delayed. We want freedom from these challenges as soon as possible,” Awadhesh K. Agrawal, Managing Director, Ranwawala Enterprises and Divisional Chairman, Lucknow Chapter, Indian Industries Association told Financial Express Online.