MSME sector, exports need Budget push

The Economic Survey, released by the government on Monday, paints a bright picture for the economy’s short and medium term growth. It views the economy should grow 6.75 percent this fiscal and 7.0 to 7.5 percent in 2018-19, riding on the series of reforms undertaken over the past year. This level of growth, the survey adds, will reinstate India as the world’s fastest growing major economy. All these sound positive.

On exports, the survey views that the global economy, as per the upward revision of the earlier projections by the IMF, is gathering pace and is expected to accelerate from 3.2 percent in 2016 to 3.6 percent in 2017 and 3.7 percent in 2018. This, in turn, should boost India’s exports. This view, along with mention about some possible global risks, particularly related to global stock markets, sound logical.

On the MSME sector, the survey points out lack of credit as a major obstacle. Mentioning latest data on credit disbursed by banks, the survey states that out of a total outstanding credit of Rs. 26041 billion as in November 2017, 82.6 percent of the amount was lent to large enterprises. The MSME sector received only 17.4 percent of the total credit outstanding. This is a major concern, considering the sectors’ massive contribution to exports and employment generation.

Considering the above, it will be interesting to see what measures the Budget comes with for these two sectors. The survey shows that the Rebate of State Levies (ROSL) has increased exports of ready-made garments by about 16 percent. So, it is clear now that exports incentives do work, and I hope the Budget will introduce some explicit sops for the sector. Similarly, it will be interesting to see what measures the Budget comes with to address the credit woes of the MSME sector.

I invite your opinions.

raghu