PMEAC wants investment allowance threshold at Rs 10 cr for MSMEs

New Delhi, Sept 13 (KNN) Strongly recommending self-assessment mode of approval for the MSMEs and reducing the threshold for minimum investment allowance to Rs 10 crore, Prime Minister's Economic Advisory Council (PMEAC) pins hope on the MSME sector to generate revenues of USD 200 billion and create 140 million jobs over the decade.

PMEAC released the Economic Outlook for 2013-14 and also recommended some measure to boost the economic growth.

Acknowledging MSME  as the prime movers of growth and employment globally, Chairman of PMEAC, C Rangarajan said, “The Committee on Angel Investment and Early Stage Venture Capital (2012), set up by the Planning Commission, has estimated the potential for creation of 2,500 successful Indian High Growth ventures by 2022, generating revenues of Rs 10 lakh crore (USD 200 billion) and generating 140 million new jobs over the decade.”

In order to make the regulatory requirements more tedious and less time consuming for the MSMEs, he said that “MSMEs could be allowed approvals, clearances etc on self-assessment basis as a default mode. They could also be exempted from the requirement to annually obtain consent to run, even when for green industry.”

Another area for such two-tier regulation could be in respect of various labour laws for notification of vacancies, filing of returns etc.

Small businesses have lesser resources and entrepreneurial energies to meet regulatory compliance requirements. The cost of such compliance may render the business unviable and also tilt the playing field in favour of larger enterprises. Currently, the regulatory regime for the organised sector is uniform.

Rangarajan Committee pitched for reducing the threshold for minimum investment allowance to Rs 10 crore from the existing Rs 100 crore.

“If the threshold for minimum investment allowance announced in last year’s budget is reduced from Rs 100 crore to Rs 10 crore, this would benefit MSMEs,” said Rangarajan in the press conference.

He further advised SIDBI to offer a repo window to market-makers dealing with SME bonds to give them greater access to financial markets.

Once an ‘in principle’ view is taken in this regard, an inter-department al task force involving experts as well could identify specific areas for such two-tier regulation, whereupon suitable overriding legislative provisions could be instituted through appropriate amendments to the MSME act, he said.

Rangarajan had projected FY14 CAD at USD 70 bn or 3.8 per cent of GDP.  The Council attributed the rise in CAD to gold and oil.

The PMEAC had in April projected 6.4 per cent growth for Indian economy for current financial year. The GDP grew by 5 per cent in 2012-13.

"Agriculture will grow at 4.8 per cent as a result of well distributed monsoon," he said. Agriculture grew at 1.9 per cent in 2012-13. He added that industries is projected to grow at 2.7 per cent in 2013-14.

Manufacturing has been pegged at 1.5 per cent for the current financial year while services are projected to grow at 6.6 per cent, PMEAC said.

PMEAC also pressed to immediately implement the measures like easily availability of export finance and reduce transaction costs to boost manufacturing exports and increase competitiveness.

“Exports should be exempted from Service Tax, as the present pay and claim refund increases transaction costs, time and unpredictability,” said Rangarajan.

Reserve Bank of India (RBI) must maintain its current monetary stance until the rupee stabilises, Rangarajan said.

PMEAC pegged net foreign direct investment (FDI) flows at USD 21.7 billion for the current fiscal year, down from an earlier estimate of USD 24 billion.

The trade deficit would remain at USD 105 billion for 2013-14, it said. (KNN/SD)