The Congress on Tuesday slammed Prime Minister Narendra Modi’s government over what it called “destructive policymaking of the last 10 years” that crippled micro, small, and medium enterprises or MSMEs. The party alleged that “the Modi sarkar has spent 10 years systematically bludgeoning India’s MSMEs through a combination of deliberate policy and wilful neglect”.
Congress leader Jairam Ramesh listed five points of such “destructive” policymaking, and suggested steps to boost the MSME sector.
He wrote on X, “The Union Budget will be judged by what it does to revive and rejuvenate India’s MSMEs.”
Finance Minister Nirmala Sitharaman will present the Union Budget on July 23.
Ramesh shared the Congress’ take via an official statement that said, “Micro, Small, and Medium Enterprises (MSMEs) account for 30 per cent of India’s GDP and about 45 per cent of our exports.”
“They employ 12 crore people — second only to agriculture — and are responsible for most job creation. MSMEs, with their wide geographic dispersion, also promote balanced regional development. Yet, the Modi Sarkar has spent 10 years systematically bludgeoning India’s MSMEs through a combination of deliberate policy and wilful neglect,” it added.
Here’s what the Opposition leader listed:
Demonetisation: The virtual cessation of all economy activity during demonetisation forced many MSMEs, unable to pay employees or repay their debts, to close. Business systematically moved from smaller firms to bigger, more organised players.
Botched GST: The initial struggles with implementation put many MSMEs out of business. Seven years later, however, GST continues to constrain MSMEs due to its high compliance burden, punitive enforcement, and slow disbursal of refunds. MSMEs do not have the resources to hire the lawyers and CAs to deal with the compliance burden. Delayed tax refunds have led to working capital blockages, jeopardizing their financial stability.
COVID-19 Lockdown: The haphazard lockdown and mismanaged pandemic control efforts, combined with the lack of an economic program to protect MSMEs, dealt a death blow to MSMEs.
Rampant Oligopolisation: Through favourable policymaking —including corporate tax cuts, PLIs, and selective doling out of Government contracts through the Chanda Do, Dhanda Lo scheme — the Modi Sarkar has sponsored the oligopolisation of key industries. Armed with Governmental support and economies of scale, oligopolies have driven MSMEs out of the market.
Cheap Chinese Imports: Since 2014, the percentage of imports from China has risen from 11 per cent of overall imports to 16 per cent. The uncontrolled dumping of these imports has rendered domestic MSMEs uncompetitive, forcing them to shut down. Gujarat, for instance, is home to 80% of India’s stainless steel MSMEs, but 35% of them have had to shut down due to China’s export of cheaper steel.
The statement added that MSMEs are faced with high tax rates, severe credit crunch, high input prices, and widespread closures. “Unsurprisingly, their contribution to GDP today is the lowest it has been in decades.”
The Congress’ “pro-MSME agenda” includes:
Extension of the Non-Performing Assets (NPA) classification period for loans to MSMEs from 90 days to 18o days
Establish GST 2.0, with a single, moderate rate & relief for small taxpayers like MSMEs
Lessen the burden of tax on MSMEs owned by individuals and partnership firms
Abandon the policy of rampant oligopolisation that has crowded out MSMEs
Dedicated funds for MSME export capacity creation, and enhanced funding for start-ups
Fixing the $53o billion credit gap in the MSME sector through a dedicated credit fund and lower interest rates
The 45-day payment rule that became operational from April 1, 2024 has split the MSME community – some want it to continue while others feel it is a disincentive for large firms to do business with them. A middle path can and must be found
Recognise MSME clusters across the country and provide for their growth and expansion including through greater use of anti-dumping duties.
More effective use of anti-dumping duties is needed to protect domestic industries.
