Government measures to ensure MSMEs become growth engine: DFS secretary

Government measures to ensure MSMEs become growth engine: DFS secretary

A slew of recent measures, including tax concessions in the budget, for micro, small and medium enterprises (MSMEs) has been taken with an aim to transform such enterprises worth Rs 6.33 crore into a growth engine for 'new India', a senior government official has said.

These initiatives will bring down the tax burden on enterprises with an annual turnover of up to Rs 250 crore and also lower the interest burden, leaving more surplus for investment and growth of the MSME sector which is the backbone of the country's economy in terms of output, exports and employment generation.

The RBI on its part too announced various measures for MSMEs hit by the implementation of Goods and Services Tax (GST) by giving them additional up to 180 days to clear their dues to banks."All these measures are aimed at making the 6.33-crore MSME enterprises growth engine for new India," Financial Services Secretary Rajiv Kumar told PTI.

Multiple initiatives are trying to address various issues inhibiting the growth of the sector, which is the largest job creator, he said.First and foremost, the recapitalisation of the banks to enable them to enhance their lending capacity by Rs 5 lakh crore, a substantial chunk of this would go towards the MSME sector.

Besides, Finance Minister Arun Jaitley in his Budget speech lowered the corporate tax rate to 25 per cent from 30 per cent for companies with a turnover of up to Rs 250 crore, benefiting the entire MSME sector, he said.As part of alignment with the new taxation regime, the Union Cabinet last week also approved the change in criteria for classifying MSMEs from 'Investment in Plant & Machinery' to annual turnover.

As per the new classification, enterprises having annual turnover of less than or equal to Rs 5 crore fall under the 'micro' category.Units having turnover between Rs 5 crore to Rs 75 crore will be classified as small enterprises, whereas those having turnover between Rs 75 crore and Rs 250 crore will be classified as enterprises.

The move will encourage ease of doing business, make the norms of classification growth- oriented and align classification norms to the new tax regime revolving around GST, an official statement after the Cabinet meet said.

Providing major relief to the MSME sector, the RBI last week also said that the formalisation of business through registration under Goods and Services Tax (GST) adversely impacted cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and non-banking financial companies (NBFCs).

The central bank also removed credit caps on MSME in services sector under priority sector."In the light of feedback received from various stakeholders and in line with the increasing importance of services sector in our economy, it has been decided to remove the currently applicable loan limits of Rs 5 crore and Rs 10 crore per borrower to MSME (Services) respectively, for classification under priority sector," it said.

In order to achieve level-playing field in the priority sector lending guidelines for banks, the RBI said, "It was stipulated in April, 2015 that post 2018 (i.e., after three years from the issuance of guidelines), the sub-targets for lending to small and marginal farmers and micro enterprises shall be made applicable for foreign banks with 20 branches and above."

The Economic Times, New Delhi, 12th February 2018

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog