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Budget 2018 should make a strong case for MSMEs, boost growth-help generate employment: Expert

Updated: Jan 27, 2018 06:16:43am
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Budget 2018 should make a strong case for MSMEs, boost growth-help generate employment: Expert

New Delhi, Jan 27 (KNN) With the Union Budget set to be tabled from February, experts including leading economists are eyeing at the upcoming document with expectations for various sectors including the Micro, Small and Medium Enterprises (MSMEs).

KNN India recently conducted an interview with Manika Premsingh, Economist and Founder of Orbis Economics along the lines of the upcoming union budget. Below are the excerpts from the interview.

1.Union Budget, what could be the overall picture, any big game changing points that the economists are eyeing at.

From the perspective of overall macro-economic stability, the key indicator to look out for is the Fiscal Deficit to GDP ratio. The number up to November, 2017 show that fiscal deficit is at 112% of the budget estimates. With the CSO having revised down India’s growth rate to 6.1% in 2017-18 from at least 6.75% as per the Economic Survey announced earlier during 2017, the potential for meeting the target of 3.2% now looks difficult. It will thus, not be surprising if the target gets breached.

Further, it would be interesting to gain insight into what the government’s next year targets are, particularly as growth will show only partial recovery. It will be interesting to see whether the centre gives into higher expenditure, since it will go into general elections soon after 2018-19.

2.This budget comes at a crucial junction. Especially with the recent roll out of the new taxation in the country, GST. What could be the focus area of the finance ministry in this regard.

The government has been very proactive in making changes to GST rates as and when required through the course of the year, in that sense they have not waited for the budget to make big bang announcements. However, the projections for GST collections will be significant to watch out for, since maintaining fiscal balance is key for the government and indirect taxes, which are now (in part) covered under the GST form a major revenue source.
 
3.Micro Small and Medium Enterprises that form an integral portion of the country's economy, what points could the government consider for this sector.

MSMEs have faced a number of challenges in the recent past. First, industrial growth has been quite slow, which has hit small entrepreneurs hardest. Second, the GST implementation had a few hiccups, which could have cost them some business. Third, costs are rising from an increase in WPI inflation overtime. Therefore, it is essential that MSMEs, who form the backbone of the economy, be encouraged. Since India has a large population concentrated in the working age group, it is essential that enough job creation take place and MSMEs are well poised to do that.

The budget should provide strong incentives for MSMEs to hire more, which will encourage both their growth and create employment.  
 
4.Credit to the industry, especially the MSMEs have been a concern all along, how could the upcoming budget seek to address this issue.

Overall credit growth has improved, and as per the latest number micro and small enterprises are witnessing positive credit growth. However, medium enterprises are still suffering. Infrastructure is one key area where credit off take has shrunk. I think it is more than just a matter of providing budget incentives to MSMEs to encourage credit growth, but to assess where the actual challenge is.

Banks have also become vary of lending indiscriminately given the high level of NPAs. Within MSMEs the government can, however, look at specific sectors that are particularly suffering and provide them tax breaks, and credit growth could follow from a more supportive economic environment on its own.

Given that India, at present is facing the challenges of limited growth, need for job creation and rising inflation; there needs to be a concerted effort to manage the overall economic condition. More incentives to industries that have been facing growth challenges, will be beneficial. Generation of revenues through non-traditional sources like higher disinvestment receipts will ensure a fiscal balance.

Some detailing on the government’s outlook on oil price subsidy, at a time when crude prices have been rising, will be beneficial. Continuing to ensure a proportionately higher expenditure goes into capital spending, is also good. This year, there should be no increase in taxes that can be potentially passed on to consumers, since inflation is already rising and growth is relatively soft. (KNN/DA)

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