Budget Expectations for SMEs
One must realize that the budget is coming at a very crucial time in our country. Our growth is the slowest it has been in recent past, thanks to the 2G, CWG, retail flip-flop, Anna Hazare – and our politico-economic credibility is at its worst perhaps in two decades. And this budget could redeem the Indian promise or set us on a slippery slope to mediocrity. What compounds the issue is that macro-economic factors like another oil shock, euro zone meltdown are at least for now simply deferred catastrophes’ and not solved problems, many of our global markets are developing protectionist tendencies, so it would be fool hardy to plan in a vacuum. We may have weathered the first storm riding on the momentum – but most indicators confirm that headwinds have an advantage right now.
It’s therefore absolutely critical to restore the momentum – and that will require the economic policy-making need a real transfusion of ideas and decisiveness – and this time around a mere “policy pedicure” will certainly not be good enough.
And we need to put to work the realization that almost 1 billion Indians live outside the metro cities and new economic momentum needs them to be mobilized as empowered participants and powerhouse not merely fringe players or passive beneficiaries.
I am sure that India Inc. already has the ear of the FM, I would rather root for the SME, so my wishlist is simple :
Provide a real stimulus package to the SME segment – they are the first to be hit and last to recover. If we need trickle down economic participation, SMEs are the key. The stimulus needs to be full life cycle covering – policy support, incentive program and economic handholding.
1. Correct course of “killing the golden goose”. Introduce a lower “deemed tax” regime for export centric IT SME’s that have seen the sunset of STPI incentives and are not yet big enough to leverage the SEZ. Absence of this will create a BIG entry barrier for investment in innovation!
2. Roll out a fresh and substantial Export driven Incentives and peg them to sourcing from SME and micro enterprises in tier 2 & 3 cities. An avatar of CII/NASSCOM type agile organization is sorely needed to setup the “made in india” export brand for SME.
3. Put in place a “graduation scheme” for enterprises supported by CGTSME – enforce it with a “quota regime” for banks. Capital is oxygen for SMEs.
4. Provide tax breaks for investments in skill building and competitive benchmarking in the SME. Multiply funding support for our Tier 1 technology institutions to setup more incubators for innovative businesses
5. Rationalize the industrial land policy –It’s about time industrial plots became centers of production and not only symbols of political agitation or ‘real estate business’.
6. Simplify and bring transparency to rules and procedures for smaller investment overseas – especially for acquisition of market foot hold or technical knowhow access by successful SMEs.
7. Make CSR accountable - provide incentive for CSR funds to be spent on community and national capability building causes and not simply backing “PR generating” projects. Incentivize medium to large enterprises to also invest in CSR – why should “regulation” be needed? – conscience should be recognized and rewarded.
In conclusion – Time for back to basics
It’s time for Back to basics. The Economic policy in the country urgently needs an infusion of fresh pioneering ideas and decisiveness. Government needs to take lead in stopping this slide down the slippery slope of flip-flops and massacred credibility. Let’s stop the culture of giving “policy pedicures” one at time.
India still has the promise but the momentum can fade fast unless the Government steps up and makes some game changing moves. It’s about the time we saw some character and leadership from those who govern and prescribe policy.