Major reforms launched during pandemic to benefit MSMEs: Economic Survey

New Delhi, Jan 29 (KNN) The Economic Survey 2020-21 presented in the Parliament today cites major structural reforms launched by the Government – in agriculture markets, labour laws and definition of MSMEs.

“The modified definition of MSMEs facilitates expansion and growth of these enterprises without them fearing the loss of government incentives, thereby avoiding the phenomenon of dwarfs among MSMEs”, the Survey observes.

According to it, the resulting economies of scale can enhance productivity without the MSMEs losing out on several government incentives including interest subvention, collateral-free loans, market support, export promotion, preferential procurement in the public sector and enabling of IT ecosystems.

“The labour reforms will benefit MSMEs to increase employment, enhance labour productivity and thereby wages in MSMEs”, the Survey notes. 

Further, the use of fulltime equivalents provides flexibility to MSMEs to tailor their labour strength to market conditions and thereby enhance employment. The increase in the size thresholds from 10 to 20 employees to be called a factory, 20 to 50 for contract worker laws to apply, and 100 to 300 for standing orders enable economies of scale and unleash growth.

Similarly, the cost of compliance would drastically reduced as 41 central labour laws have been reduced to four and the number of sections falling by 60 per cent from about 1200 to 480.

The other reforms include number of minimum wages being reducing from about 2000 to 40, one registration instead of six, one license instead of four and de-criminalisation of several offences.

These reforms balance the interest of both workers and employers. These codes provide social security, protection, safe and working environment and effective conciliation dispute mechanism to workers.