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Hiring outlook in manufacturing still weak

How new e-invoicing norm will affect MSME sector?

Centre promulgates IBC amendment ordinance to allow pre-packaged insolvency for MSMEs

How changes to IBC can help troubled MSME sector?

How changes to IBC can help troubled MSME sector?

Govt has enabled a mechanism via an ordinance under which MSMEs can continue operations using the resolution process without needing to shut shop or change management.

The new amendments to the Insolvency and Bankruptcy Code (IBC) are an attempt to save the micro, small and medium enterprises (MSMEs) that have been hit hard by the pandemic and the consequent supply chain disruptions, Ministry of Corporate Affairs Secretary Rajesh Verma told ThePrint in an interview.

“We were concerned about the MSMEs and wanted to ensure that there are alternate frameworks available for companies facing stress. MSMEs are critical to the supply chain and are hit hard due to supply chain disruptions caused by the pandemic. Our aim is to save these micro, small and medium units,” Verma said.

In one of the biggest amendments to the IBC, 2016, notified on 4 April via an ordinance, the Narendra Modi government brought in changes to the way stressed MSMEs can be rescued.

The government enabled a mechanism through which these units could continue operations via the resolution process without needing to shut shop or see a change in management — features that are part of the existent corporate insolvency resolution framework.

The introduction of the new framework comes at a time many small firms have been severely affected by the disruptions caused by the pandemic, including lockdowns and restrictions on people gathering in big numbers in a particular place. There is an expectation that insolvencies among the small firms will see a sharp increase after a year of suspension of the IBC.

As a part of its Covid relief package, the Modi government had announced the suspension of the provisions of the IBC. This effectively meant that lenders could not drag a company to bankruptcy court for any defaults that arose during this period. However, this relief ended in the last week of March, leaving all subsequent defaults open to insolvency proceedings.

‘Aim is to save MSMEs’

Speaking about the changes, Verma said the government wanted to rescue the MSMEs and envisaged “prepack” for this.

He was referring to prepackaged bankruptcy — advance agreement to deal with bankruptcy — which ensures that cases do not reach the NCLT but are resolved beforehand and without management control of the stressed company necessarily changing hands.

The change from a creditor-in-control model to a debtor-in-possession model is a fundamental shift away from the approach that has been followed so far, which forces the promoters of a firm heading towards insolvency to cede control to the creditors.

“The aim is to ensure that the MSMEs continue their operations as going concerns. This will also preserve employment. We have put in place sufficient safeguards as well,” he said.

The ordinance proposes many safeguards to ensure this new resolution framework is not misused. These include the approval of two-thirds of the financial creditors and agreement among 75 per cent of the firm’s shareholders for a stressed promoter (corporate debtor) to continue to run the company.

According to the ordinance, the pre-packaged resolution framework can only be invoked for defaults of up to Rs 1 crore. Further, the resolution process has to be completed within 120 days.

Welcome move, say analysts

Soumitra Majumdar, Partner, J Sagar Associates, said this is a welcome move and is aimed at flexible, timely and viable resolutions while causing the least disruption.

“While modelled on debtor-in-possession approach, it vests significant consent rights to the financial creditors, such that the mechanism cannot be mis-used by errant promoters,” he said in a 5 April note.

He added that the changes retain the “competitive tension” so as to nudge promoters to propose plans with least impairment to rights and claims of creditors.


MSME: Why product quality matters more today?

What comes to mind when you hear of coffee grown and processed in Kenya, clothes made in Turkey or cars made in Germany?

it is the quality of the product or service.

Quality can be described as the degree of excellence. From improving processes, systems, products and services to making sure that the whole organisation is fit and effective, managing quality effectively enhances an organisation’s potential for success. Quality is central to a country’s brand and reputation. It protects organisations against risks, increases their efficiency, boosts profits and makes them sustainable.

On the other hand, failures in quality resulting from poor governance, ineffective assurance and resistance to change can have dire consequences for businesses. Many will remember the reputational crises endured by BP resulting from the Gulf of Mexico oil spill of 2010, and VW emission cheating scandal of 2015. Both companies are dealing with the ramifications to date. The fallout could have been avoided through effective management of the quality of outputs. 


Quality is not just about disaster prevention, but also achieving great results. Today, it is more important than any other time to match one’s services and products to the needs of their customer. As the international business environment becomes increasingly competitive, customers are more and more demanding and discerning about quality.

What comes to mind when you hear of coffee grown and processed in Kenya, clothes made in Turkey or cars made in Germany? I am certain that it is the quality of the product or service.

Quality can be described as the degree of excellence. From improving processes, systems, products and services to making sure that the whole organisation is fit and effective, managing quality effectively enhances an organisation’s potential for success. Quality is central to a country’s brand and reputation. It protects organisations against risks, increases their efficiency, boosts profits and makes them sustainable.

On the other hand, failures in quality resulting from poor governance, ineffective assurance and resistance to change can have dire consequences for businesses. Many will remember the reputational crises endured by BP resulting from the Gulf of Mexico oil spill of 2010, and VW emission cheating scandal of 2015. Both companies are dealing with the ramifications to date. The fallout could have been avoided through effective management of the quality of outputs. 

Quality is not just about disaster prevention, but also achieving great results. Today, it is more important than any other time to match one’s services and products to the needs of their customer. As the international business environment becomes increasingly competitive, customers are more and more demanding and discerning about quality.

India can beat China in low-cost manufacturing if policies allow: R.C. Bhargava

India has the capability to become a lower cost producer than China if the industry and the government work together, Maruti Suzuki India Chairman R.C. Bhargava said.

Bhargava presented his ideas on making Indian manufacturing globally competitive at an online dialogue with the country's management leaders organised by All India Management Association (AIMA).

Bhargava argued that the only objective of government policies has to be to increase the competitiveness of Indian industry so that it can make things at the lowest cost and the best quality in the world. "The more the industry can sell, the more jobs will be created in the economy," he said.

He pointed out that Maruti Suzuki produces more cars each year without adding to its workforce, but the increased sales of cars each year create more jobs in the service economy.

Bhargava said that there is fault in the policy thinking that focuses on job creation by each sector instead of job creation in the total economy.

With regard to states reserving jobs in manufacturing for locals, Bhargava said that it is an anti-competitive step.

The LeaderSpeak session, which was 33rd in the series, was moderated by Harsh Pati Singhania, President, AIMA and Vice Chairman and Managing Director, JK Paper Ltd, while Rekha Sethi, Director General, AIMA, anchored the session.

The protection for the MSME sector has been the bane of Indian manufacturing, according to Bhargava. He argued that the MSMEs have to be as globally competitive as the large companies because the supply chain determines overall competitiveness. He said that the government should understand that the small-scale businesses in manufacturing and the services are different animals and must be treated differently by the policymakers.

Indian industry cannot be competitive unless the promoters and managers treat workers as partners, argued Bhargava. He pointed out that Maruti owes its success to explaining to its workers that they will prosper if the company grows and backing that with policies and actions that delivered income and career growth to the employees. He said that Indian workers had been protected and pampered by the government and the courts before 1991 and the managements themselves had made no attempt to educate workers about what they would gain if the company grew.

Indian industry struggles with high cost and low efficiency in every area because of the nature of politics in the country, according to Bhargava. He said that not only the logistics, but India's competitiveness is lower through entire infrastructure because of government control. The cost of finance is also high in India because of government ownership of banks, which results in high lending rates and loss of competitiveness of Indian industry, he added.

The lack of trust between the people and the industry is a major constraint on policymaking, he said, adding that that when people see promoters and their families using companies for their own benefit instead of benefit of all stakeholders, they suspect politicians who support the private sector.

However, he expressed satisfaction with the government for supporting private industry and talking about building trust. "Big industrialists have to win trust. The government cannot do it for them," he said.

Surviving the 'New Normal': Indian SMEs And Their Quest To Find the Light Within the Tunnel

Surviving the 'New Normal': Indian SMEs And Their Quest To Find the Light Within the Tunnel: Arundhati MukherjeeFounder and Director, Aaroh. Source: Enterpenur India


While COVID-19 has inflicted significant damage on the organized world, several new opportunities for transformation have also emerged. The current situation has provided businesses an opportunity to make an extreme paradigm shift in the way they approach the market, employees and investments in the future. A key change has been in the mindset on equity structure. Businesses have gradually understood that they need to be agile and flexible for survival, in addition to looking for and leveraging opportunities thrown up by adverse conditions.

SMEs play a major role in the economy of the world, more so in India—contributing to the GDP and employing workforce and in a nation which still lives majorly in its hinterland. The increase in the fortunes of the SMEs in India is directly proportional to the growth our country witnesses. It is thus critical for SMEs to adopt pivotal strategies in order to normalize their operations during and post the COVID-19 era.

Equity vs Debt… It’s time SMEs make the right choice

A common scenario which we often witness in India is of large businesses and startups opting for equity as they prefer bringing-in more knowledge in lieu of sharing ownership and profits. Most often, equity investors enter at a low cost and are therefore willing to take risks to get higher return on an otherwise minimal initial investment. A well-managed equity has a history of adding great wealth to an organization as well as to the personal wealth of the entrepreneur. Unfortunately, many negative stories about equity continue to cloud the vision of SMEs, so it is considered a double edged sword.

By simply looking at success stories of organizations, it is a no-brainer to comprehend that the scope for growth and success rates of equity as a source of funds is exponentially higher than that of debt. Debt makes SMEs risk averse and reduces their ability to innovate and grow, which is why SMEs in India need to latch onto the equity model to ensure they are able to launch new offerings and innovative solutions. Ironically, the visibility is lower for failures of debt-heavy models as it is managed within organizations whereas failures in the equity market are rigorously tracked and recorded due to compliance issues and the media interest in listed companies.

A planned and well-managed approach to the market reduces risks and ensures that the enterprise looks attractive to investors. SMEs record better performance when they are not overleveraged and with the business scenario as it is today, overleveraged books can really spell the doom of established organizations.

Optimise performance to adjust to the ‘new normal’

Technology such as AI, CRM, automation, cloud among other innovations coupled with a high performing workforce can really increase revenues per employee metrics. SMEs need to invest in this area in a structured manner to improve the IT infrastructure and not look at it as a dead or high-cost investment. Bringing in professionals at the highest levels will help usher in the required business understanding to implement technology which in turn will be a huge stepping stone to growth. Today with SAAS models and innovative staffing models becoming more acceptable in India, the opportunity to access the ebay technologies and hiring highly qualified professionals and mentors is higher than ever and shouldn’t be missed by SMEs. It can become their single biggest catalyst for growth or their biggest missed opportunity.

Relooking at sales function and evaluating with an open mind

With travel being restricted and the fear of meeting people, more and more organizations are recognizing the need to use the more efficient digital platforms to create their funnels and even take the sales process forward through such funnels. While larger businesses, due to their sheer geographical spread have a history of leveraging digital online meeting platforms; this trend however has not traditionally been adopted by Indian SMEs who have always been inclined towards face to face meetings for both selling and procurement purposes.

Digitization of the process for acquiring new customers has been used by larger companies for years and SMEs are realizing quickly that those models can be adapted for smaller companies as well. Experimenting with different models, using tools like CRM, online calendars, meeting platforms, inside sales, online sales collaterals, microsites and explainer videos have today become popular tools for helping enterprises pivot their customer acquisition process. Organizations adapting quickly, remodeling and reskilling their sales and marketing organizations are coming out as winners.

Brand building for a stronger today and tomorrow

Brand building has traditionally been neglected by SMEs. The need for new customers to trust an organization without meeting them physically means that the organization and its leaders—both need a strong brand. SMEs now need to build a brand to cover all major aspects of their business: access to customers and to investors or financial institutions—leadership brand, investor brand as well as the corporate brand. Building a brand is no longer the prerogative of large enterprises. If SMEs have to survive and grow, they need to build a brand that will ensure that the brand survives through multiple generations of leaders and one that thrives independent of individuals.

‘Many MSMEs are still unaware of digital impact, they fail to build customer loyalty, retention’

‘Many MSMEs are still unaware of digital impact, they fail to build customer loyalty, retention’

Technology for MSMEs: The Coronavirus crisis and the lockdown was a phase of evolution for various MSME sectors. Digitization opened the gates for many local businesses to strengthen their operations and cope up with these stressful times.

Many tech-based companies are building exclusive tools to support small and medium scale enterprises.

By Alok Bansal

Technology for MSMEs: The increasing affordability of smartphones, rising internet usage, and growing digital media use are shaping the future of MSMEs and startups in India. India is amongst the biggest and fastest developing markets for digital users. As Digital India emerges, one can see a paradigm shift in the conventional ways of business. The small and medium scale enterprises understand the value of digital transformation for business expansion. They believe digital proficiency is vital to set foot in the online market successfully. Needless to say, digitalization has become a critical factor for all enterprises to survive.

Digitization During Pandemic

'Investments in startups, others may perk up as economy likely to hit pre-Covid level in March quarter'

‘Poor leadership can cost 7% of a firm’s turnover, 4% lower revenue growth, lower customer satisfaction’

The Coronavirus crisis and the lockdown was a phase of evolution for various MSME sectors. Digitization opened the gates for many local businesses to strengthen their operations and cope up with these stressful times. To begin with, local grocery stores that functioned traditionally have now embraced the doorstep online delivery trend and use ‘google sheets’ to record received orders and their stock. Further, digital payment modes were adopted to maintain social distancing as customers did not prefer cash payments.

Physically meeting with doctors was a traditional sales process in the pharmacy industry. However, this was replaced overnight by discussions over digital communication channels. This digitalization of sales force has changed their knowledge-base, skills, and execution during the pandemic. Agribusiness chemical distributors are utilizing online networking channels like Facebook and Zoom videos to connect with farmers in rural areas. Lastly, digital resources played a tremendous role in the education sector to provide classes and training to students online. Hence, many of the technologies became integral to these businesses. With the surge of technology and the prevailing Covid-19 dilemma, the future of the Indian economy will have everything to do with digitalization. No doubt, Indian startups, and MSMEs have perceived that technology can be a pivotal aspect for their ventures and even to bounce back post-pandemic.

Key Factors for Digital Transformation of MSMEs and Startups

MSMEs and Startups can make better decisions with the help of data analytics and business intelligence as they offer a more in-depth insight into consumer journeys. The acquired details help to gauge and foresee client needs. Further, with the rise of cloud-based solutions and freemium models of these services, businesses can create systems that can improve the customer experience. Besides, companies can produce new products or services that meet customer demands. It also advances the delivery process of the right products at the right time that too at a moderate price range. All these factors boost customer engagement for their business that is key for any enterprise to thrive.

Challenges to Overcome

Nevertheless, Indian MSMEs also have to clear some roadblocks to sustain on the path of digital transformation. The current challenges are:

MSMEs have limited growth capital that makes technology adoption and digital transformation demanding.

Buying the latest smart devices, best internet services, and retaining skilled employees to manage digital systems is also an expensive affair for them.

There are still many small and medium scale enterprises who are unaware of the impact of digital transformation and fail to build customer loyalty and retention as other e-businesses.

MSMEs are resistant to augment digital technologies because cutting-edge technologies evolve faster, and they sometimes may not be able to match up with that advancement.

Storing, analyzing, and managing crucial structured and unstructured data to make business decisions is challenging for MSMEs.

Data, cloud, and system management along with the training required to handle them, leave MSMEs uncertain.

Tackling the Problem

To make good use of digital transformation, micro-businesses today are taking help from tech-based start-ups. Their vision is acclimatizing the MSME segment with the digital world. Building a full digital ecosystem and rendering the best support will promote Indian MSMEs towards successful digitalization. From aiding Kirana stores to deliver grocery items through online channels to facilitate the building and launch of e-stores, these startups are providing all kinds of digital services and easing the digital transformation for MSMEs.

Exclusively Developed Tools

Many tech-based companies are building exclusive tools to support small and medium scale enterprises. These tools can enhance the business proficiency and profitability for these small and mid-sized companies. For instance, Google Advantage, an initiative by Google India facilitates MSMEs to use the growing online clientele base. Then there is Google My Business specifically developed to support startups, and MSMEs in India to succeed virtually. These tools are great free resources to create and restore the business data on Google Maps, Search, and Google+ in Hindi as well as English.

The users today necessitate things to be quick and free of errors. It is nearly impossible to deal with all the customers through manual processes smoothly. Digitalization will therefore prove to be the game-changer. Any job, whether small or big, gets easy to accomplish with the help of technology. Moreover, the core aspect of any business, that is, decision making becomes seamless when organizations have the right data accessible at the right moment. For an MSME or startup to flourish today, it must accept digitalization with open arms. Advanced technologies, including AI, data science, IoT, Blockchain, cloud computing, robots, and the development of new business models, will extensively transform the business models of Indian MSMEs and startups. Digitally transforming enterprises are the potential flag-bearers of the future.



Low trust & confidence hit Trade Credit Ecosystem

Low trust & confidence hit Trade Credit Ecosystem: Expert

Trade Credit (TC) which is an integral and known way to make payments in the businesses have been paralysed due to low trust and confidence following COVID-19 pandemic, said B L Chandak, Ex-DGM, SIDBI.

Apart from these, Chandak also said that issues like credit indiscipline which heightened credit risk perception, credit inadequacies, payment crisis on macro-level output, productivity, aggregate credit and banks are of systemic proportion too has affected TC.

''The prime cause for this is systemic disruptions in credit and payment flow in trade credit [TC] network,'' he said.

He further said that banking sector distress is basically a manifestation of interconnectivity-cum-feedback effects of dysfunctional TC adding, ''It is becoming systemic. Unorganised sector is facing the prospect of solvency-liquidity contagion.''

''Any loss of faith in the credit-based payment system results in more cash-based and fewer credit-based transactions. Unprecedented spurt in currency supply despite recession and spurt in digital payments reflects this,'' he added.

Banks supportive measures, higher public expenditure, monetary easing, policy reforms and external fund inflows can’t stimulate growth to the desired levels as ultimately the finance has to travel through the TC network – the prime base of working capital finance.

''Growing deterioration in TC system integrity needs to be handled fast and effectively; else it can lead to chaotic and contagion conditions in both real and financial sectors.'' he asserted.

Chandak further said that for strengthening TC network, trade associations’ role is crucial in reinforcing transactional and environmental trust and generalised credit discipline in TC ecosystem.

The government may accredit select industry associations to work for self-discipline/self-regulation, prompt payment and encourage them to take collective action against TC renegades.


Massive shrink in MSME dominated labour intensive exports

The export of labour intensive segments dominated by MSMEs has registered a sharp decline during Apr-Aug 2020 quarter compared to corresponding quarter last year.

The contraction on export front has been to the tune of 47% in Readymade garments, 53% in Leather and 62% in Gems and Jewellery sector when compared quarter to quarter of 2019 and 2020. 

All manufacture goods have witnessed a secular downward trend with the exception of pharmaceuticals which registered a growth of 13% with corresponding period. 

The analysis put forward by Care Ratings, the outliers product categories where positive growth is seen are iron ore (54%), rice (25%), fruits & vegetables (6%).    

According to the report, there has been an over 40% decline in India’s exports to each of its main export destination i.e. Africa, America, Europe and Asia. 

The fall in exports to Europe has been the sharpest. Exports to Europe that account for nearly 20% of the country’s exports has fallen by 48% lower in April-July’20 v/s that in April-July’19. In case of America the decline has been 44% and that to Asia 40%.

Standard Chartered: SOLV launches credit card for MSMEs

B2B digital platform SOLV has rolled out a MSME segment focused Credit Card, in partnership with Standard Chartered Bank. Through the Credit Card, MSME clients would be able to meet business expenses such as supplier payments, fuel, logistics, purchase of raw material, utility payments and others working capital outlays whilst also using the SOLV platform to trade goods, the company said in a statement.


SOLV said the product was rolled out in line with the cashflow issues MSMEs were facing amidst the COVID-19 led slowdown, adding that the product was “unique in its timing and host of customisation that allows for short-term revolving credit availability for small businesses.”


MSME clients would not be charged with any joining fees whilst applying for hte Credit Card, which also provided users with cashback and reward features tailored for the use of businesses such as a 5% cashback on fuel transactions which would effectively make more than two litres of petrol free on a fuel spend of Rs. 4000 every month. “Additionally, micro & small businesses can strengthen their digital credibility, which is fast becoming a must-have for success in the current business environment,” said SOLV.

TDS relief expected for MSMEs transacting through e-commerce platforms

TDS relief expected for MSMEs transacting through e-commerce platforms  

Delhi : The government is considering provision of relief to micro, small and medium enterprises (MSMEs) hit by the Covid-19 pandemic, sparing them from a 1% tax on gross sales through e-commerce platforms, which takes effect on October 1, officials said. 

The tax exemption limit could be increased from the existing Rs 5 lakh for small businesses. The tax deducted at source (TDS) mechanism would continue to check tax evasion by entities using e-commerce platforms to sell goods and services, two officials working in different ministries said, requesting anonymity. “The provision has been introduced in the Budget 2020-21 to make e-commerce transactions tax-compliant. Hence it has a clause related to PAN [permanent account number] or Aadhaar number,” one of the officials said. 

Finance minister Nirmala Sitharaman, in her budget speech on February 1, 2020 introduced a TDS mechanism for e-commerce transactions. “In order to widen and deepen the tax net, it is proposed to provide that e-commerce operators shall deduct TDS on all payments or credits to e-commerce participants at the rate of 1% in PAN/Aadhaar cases and 5% in non-PAN/Aadhaar cases,” she said.

94 per cent MSMEs relied on IT infrastructure during the lockdown to stay afloat

New Delhi, Sept 19 The COVID-19 pandemic has driven digital transformation of Micro, Small and Medium Enterprises (MSMEs) in India, as these businesses are now adopting technology for business continuity and growth. The same can be confirmed from a study by Tally Solutions which encapsulates how MSMEs embraced technology and handled business operations to come out resilient and ensure business stability. As per the study, 94 per cent business owners state that adopting technology (IT Infrastructure) helped their business operations during lockdown while 67 per cent respondents from West adopted a full-fledged IT infrastructure in their business post lockdown as compared to just 29 per cent during lockdown. Similarly, 60 per cent respondents from South adopted a complete IT infrastructure post lockdown as compared to only 24 per cent during lockdown. The study also highlights that 82 per cent of small businesses are optimistic about the outlook of business continuity with current cash flow getting better, allowing 66 per cent of them to pay salaries on time after Unlock 3.0. ''During lockdown 38 per cent of businesses were not operating at all, while 35 per cent of businesses were operating daily with limited hours and only 23 per cent of businesses operated with regular hours,'' claimed the study. While post lockdown 48 per cent of businesses operated daily with limited hours and 38 per cent operated with regular hours. Only 5 per cent businesses are unable to operate, the report said. “Despite being one of the most adversely impacted sectors, the MSMEs have shown immense resilience and dynamism to overcome this situation through innovation and adaptability. Not only have these businesses ensured sustenance but also shown great moral character by supporting their employees during this time. Their unwavering spirit is an example for us all to follow in the times of adversity,” said Joyce Ray, Head- India Business, Tally Solutions said. Digital adoption is essential for businesses to leverage opportunities and accelerate business. While MSMEs continue to work towards reaching normalcy, to bounce back stronger they must adopt the right technology tools and business management solutions. This will lead to streamlined operations, enabling remote work capabilities, optimizing expenses, and better cash and inventory management – all resulting in business sustenance and growth.

SIDBI joins hands with govt of Rajasthan for the development of MSME ecosystem in State

Small Industries Development Bank of India (SIDBI), the principal financial institution engaged in the promotion, financing and development of Micro, Small and Medium Enterprises (MSME), has entered a Memorandum of Understanding (MoU) with the Rajasthan government to develop the MSME ecosystem in the State.

The MoU was signed by Archana Singh, IAS, Commissioner Industries, Government of Rajasthan and Balbir Singh, General Manager, SIDBI in the presence of Parsadi Lal Meena, Cabinet Minister for Industries and State Enterprises, Government of Rajasthan andShri Naresh Pal Gangwar, IAS, Principal Secretary, Industries and MSME, Government of Rajasthan. 

Under the agreement, a Project Management Unit (PMU) will be deployed by SIDBI with the Government of Rajasthan. The role of the PMU will be to design schemes/programs in the areas of equity support, interest subvention, resolution of stressed MSMEs, supporting MSME entrepreneurs and facilitate other need-based intervention based on evaluation of the existing status of MSMEs. 

On this occasion, V Satya Venkata Rao, Deputy Managing Director of SIDBI said, “We have already initiated the process of collaborating with state governments for more focused engagement in various forms for the upliftment of MSMEs. We have appointed an expert agency for setting up PMUs in 11 states namely, Assam, New Delhi, Haryana, Rajasthan, Uttar Pradesh, Uttarakhand, Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu in the pilot phase. 

With this SIDBI intends to cooperate closely with state governments to strengthen the enterprise ecosystem with thrust on Micro and Small enterprises. Imbibing good practices, rejuvenating existing programs and policies, and enable more responsive ecosystem shall be the target of our joining of hands.” 

“We are set up to empower MSMEs in the State of Rajasthan. The PMU will study existing framework of schemes, interventions, initiatives, projects etc. which are currently available for the benefit of / targeted towards MSMEs in the State and shall suggest modifications, if any, with the objective of enhancing efficacy and removal of bottlenecks,” said Balbir Singh, General Manager, SIDBI. 

This developmental initiative is aligned to expectations laid down in the UK Sinha Committee on MSMEs set up by RBI. It envisions more focused engagement of SIDBI with State Governments for MSME promotion & development. The PMU will also prepare the process for handholding MSMEs in the State for their on boarding onto digital platforms such as PSBLoansIn59Minutes, Stock Exchange listing, e-commerce platforms such as Government e-Marketplace etc. Along with that, the PMU will also engage in mapping repositories of good practices and guidelines both within and outside the State and facilitate adoption of good practices. It will create a framework for evaluating the impact of interventions being made for the benefit of MSMEs and shall also provide inputs for policy advocacy.

MSME Ministry writes to CMDs of top 500 Corporate Enterprises over delayed payments

In another major step towards payment of MSME dues by different sectors, Union Ministry of Micro, Small and Medium Enterprises (M/o MSMEs) has now impressed upon the private sector enterprises of the country to take measures for release of payment of MSME dues on priority.

During the announcement of AtmaNirbhar Package, it was desired that the MSME receivables and dues should be paid in 45 days. Accordingly Ministry of MSME took up the matter aggressively with Central Ministries, their departments and Central Public Sector Enterprises (CPSEs). In addition to writing and following up with them,  

Ministry has also devised an online system for reporting. Hundreds of CPSEs have been reporting on this system about the monthly dues and payments since last four months. Around Rs. 10000 crores have been reported to have been paid by the Ministries and CPSEs. Similarly, Ministry has also taken up the issue with States and motivated them to monitor and see that such payments are made expeditiously.

MSME exporters facing huge liquidity challenges due to stoppage of MEIS benefits of over Rs 10k cr:

The Federation of Indian Export Organisations (FIEO) has said that MSME exporters are facing huge liquidity challenges due to the stoppage of MEIS benefits of over Rs 10,000 crore from April 1 and IGST refunds.

The Merchandise Export from India Scheme (MEIS), introduced in April 2015, will be wound up by December 31, 2020, and the government has already announced the Remission of Duty or Taxes on Export Products (RoDTEP) scheme to replace MEIS. 

''Despite the pandemic, Indian exporters have started receiving a lot of enquiries and orders from across the globe helping many sectors to show improved export performance, which is likely to get better in next few months. However, exporters, particularly from MSME sector, are facing huge liquidity challenges due to the stoppage of MEIS benefits of over Rs 10,000 crore from 1.4.2020 and IGST refund now,'' said FIEO president Sharad Kumar Saraf on Monday. 

''At this point of time when exporters are receiving new orders from new buyers and destinations, support needs to be given to help them to execute such orders. Unfortunately, many of the exporters have expressed their inability to honour such orders, in view of liquidity challenges, due to stoppage of exports benefits and refund of GST,'' he added. 

Saraf urged the government to look into the issue as any letup in our export efforts, at this juncture, will cost us dearly while successful execution of these orders will bring additional export business from new and unexplored territories. 

''All wings of the government should sit together to resolve the technical and financial issues, helping the seamless flow of liquidity to the exports sector,'' opined Saraf. 

FIEO president also said that banks are helping eligible exporters with the Emergency Credit Line Guarantee Scheme (ECLGS) but due to hold up of GST refund and MEIS, the exporters are forced to seek additional loans from banks and such additional requirement is now subject to very high interest rates. Banks need to consider this pragmatically and provide a competitive interest rate to the exports sector particularly as the deposit rates have come down substantially with the reduction in key interest rate. 

''The government needs to pay interest on the delay in refunding GST to compensate the exporters,'' he added. 

FIEO also urged the government to address the issue of Risky Exporters by providing them duty drawback and IGST benefits against a bond, if physical verification of such exporters has been established. The SOP issued for risky exporters may be meticulously followed so that after due verification, exporters are taken out from the category immediately. 

Saraf exuded confidence that export performance is improving and with due support from all the stakeholders, we can bring exports back on track by the end of the year.

BARC offers technologies to MSMEs under AKRUTI Scheme

India’s premier R&D institution Bhabha Atomic Research Centre (BARC) has developed a range of technologies suitable for deployment by Micro and Small & Medium Enterprises (MSMEs).

The technology spinoffs in BARC are being offered under Advanced Knowledge and Rural Technology Implementation (AKRUTI) scheme. 

The technologies on offer include Domestic Water Purifier, Nano-composite Ultrafiltration Membrane Device for domestic drinking water purification 

Process for enhancing shelf life of Litchi; Tissue culture technologies for turmeric & banana;   

Micro fine Neem Biopesticide; Instant Fish Soup Powder, Nisargruna Biogas Plant based on biodegradable waste (1TPD); Rapid composting technology for decomposition of Dry Leaves, Kitchen waste and Temple waste; Solar Energy driven Portable Domestic Brackish Water Reverse Osmosis Technology; Soil Organic Carbon Detection & Testing Kit; Solar Dryer/ Foldable Solar Dryer among others. 

BARC is licensing these technologies for a moderate fee Rs. 1250 to Rs 25000. Women Entrepreneurs (WEs) are further encouraged by providing additional 10% concession on ATP license fee with other conditions remaining same. 

Under the AKRUTI Tech Plus (ATP) is made of optional fifteen technologies and three consultancy services. 

Details of technologies and application process is available at: http://www.barc.gov.in/akruti-tp/index.html

MSME ministry announces new guidelines for Pottery & Beekeeping schemes

MSME ministry announces new guidelines for Pottery & Beekeeping schemes

Ministry of Micro, Small and Medium Enterprises (MSMEs) on Thursday announced new guidelines for schemes such as Pottery and Beekeeping activity under which it expanded and doubled the support for these two activities. ''A few days ago, the Ministry of Micro Small and Medium Enterprises (MSME), had announced expanding and doubling the support to Artisans who might be interested in making Agarbatti.  

Taking these efforts further, the Ministry has now come out with new guidelines for two more schemes which include ‘Pottery Activity’ and ‘Beekeeping Activity','' an official statement said. It further said that these new initiatives of the Ministry with beneficiary-oriented Self-Employment schemes, are aimed at rejuvenating the grass root economy contributing to AtmaNirbhar Bharat Abhiyan. 

''For ‘Pottery Activity’ the government will provide assistance with pottery wheel, Clay Blunger, Granulator etc. It will also provide Wheel Pottery Training for traditional pottery artisans and Press Pottery training for pottery as well as non-pottery artisans in Self Help Groups,'' it said. Under the new guidelines there is also a provision to provide a Jigger-Jolly training programme for pottery as well as non-pottery artisan in Self Help Groups.  

With the new guidelines the Ministry aims to enhance the production, technical knowhow of pottery artisans and to develop new products at reduced costs; to enhance the income of pottery artisans through training and modern and automated equipment; to provide skill-development to SHGs of pottery-artisans on focused and decorative products, with new pottery designs; to encourage the successful traditional potter to set up unit under PMEGP scheme; to develop necessary market linkages by tying up with exports and large buying houses; to innovate new products and raw materials to make international scale pottery in the country; Preparing them to graduate from pottery to crockery and Trainer's training programme for skilled pottery artisans who want to work as Master Trainers. ''A total of 6075 Traditional and others (non-traditional) pottery artisans, rural unemployed youth and migrant labourers will benefit from this scheme,'' the statement added.  

It also said that an amount of Rs 19.50 crore will be expended to support 6075 artisans with a Centre of Excellence, with MGIRI, Wardha, CGCRI, Khurja, VNIT, Nagpur and suitable IIT, NID and NIFT etc, for product development, advance skill programme, and quality standardization of products.

The Khadi and Village Industries Commission will give employment to nearly 1,500 persons

The Khadi and Village Industries Commission (KVIC) has extended the benefits of various employment generation schemes to nearly 1,500 persons in 10 cities to celebrate ''Sewa Diwas'', which marks the birthday of Prime Minister Narendra Modi.

From Arunachal Pradesh on the North Eastern Frontier to Bikaner on the Western Border and from Chandigarh and New Delhi in the North to Madurai and Coimbatore down South, KVIC on Thursday organized 14 programs to expand the ambit of its welfare projects to create local employment. 

Minister of State for MSME, Pratap Chandra Sarangi inaugurated a SFURTI Cluster of 500 artisans for making hand-knotted carpets in Prayagraj in Uttar Pradesh. Sarangi lauded the initiatives of KVIC for empowering artisans and said this would help realize the dream of resurgent India. 

''Khadi is playing a big role in making India “Aatmanirbhar”, he added. 

KVIC Chairman Vinai Kumar Saxena launched six different programs in Varanasi, the Parliamentary constituency of the Minister, that include the first Footwear Training cum Production Center in Varanasi for leather artisans (Mochi) in collaboration with Central Footwear Training Institute (CFTI), Agra. He also distributed 6 innovative cycle-mounted Tea/Coffee Selling units under Project DigniTEA that will enable tea-sellers to earn a respectable livelihood while selling tea/coffee hygienically. 

He distributed electric pottery wheels to 300 Kumhar families under Kumhar Sashaktikaran Yojana and 200 bee boxes to 20 farmers' families under Honey Mission. Later, he also distributed 6 hand-operated Agarbatti making machines at Sewapuri Block in Varanasi under the Khadi Agarbatti Aatmanirbhar Mission while also launching the plantation of 100 saplings of Bambusa Tulda, a bamboo species used for making Agarbatti sticks. This will lead to the local availability of raw material for Agarbatti. 

Notably, Sewapuri has been identified as one of the “Inspirational Districts” by Niti Aayog and several projects have already been launched at Sewpuri to provide employment to migrant workers. 

In the scenic village of Chullyu in Arunachal Pradesh, Saxena inaugurated the state's first Silk Training cum Production Centre that will create local employment to artisans and increase the production of local Silk. KVIC has renovated a dilapidated government school building to develop the Silk Training cum Production Centre. Locals said no such job-oriented activity had taken place in Arunachal Pradesh in the last 50 years. 

KVIC Chairman said sustainable development through local employment generation has been the key focus of KVIC which is aligned with the Prime Minister’s commitment of “Job to Every Hand” (Har Hath Me Kaam). 

“It is the inspiration and appeal of the Prime Minister that has taken Khadi to a new height. We are hopeful that he will continue to lead Khadi as its biggest brand ambassador,” Saxena said. 

He also distributed 6 cycle-mounted Tea and Coffee selling units to local unemployed youths each in New Delhi, Jaipur and Chandigarh. 

Seeking to empower local artisans, KVIC Chairman distributed New Model Charkha in Rajasthan’s Bikaner district and Kovilpatti in Madurai district in Tamil Nadu. Similarly, to provide Khadi artisans with better marketing opportunities, KVIC inaugurated two Khadi sales outlets in Barkhedi in Bhopal and Coimbatore in Tamil Nadu respectively.

Union Minister MSME, Mr. Gadkari seeks investment for MSMEs from Int'l bodies

Union Minister of Micro, Small, and Medium Enterprises (MSME) Nitin Gadkari has sought investment by international institutions and bodies in the MSME sectors.

According to a statement, he said this while addressing the Indo-Australian Chamber of Commerce and Women Innovator on Trade Investment and collaborations in road infrastructure and MSMEs on Wednesday. 

The minister further said that the government is concentrating on village, agricultural and tribal sectors for providing employment opportunities there. 

"It is the MSME sector which will drive the Indian economy in the coming years,'' he emphasized. 

He also said that investment in infra and insurance sectors has been opened up, as there are huge opportunities in insurance, pension and share economies.

Summary of the Announcements made by the Government for the MSME Sector On 13th May, 2020

Summary of the Announcements made by the Government for the MSME Sector On 13th May, 2020

Specific to MSME Sector 

Post1 

Government of India announces Collateral Free Automatic Loans worth Rs.3 lakh crores for MSMEs, with. 

100% Credit Guarantee 

12 month moratorium on payment of principal 

No Guarantee Fee & Collaterals 

Tenor– 4 years 

To benefit 45 lakh MSME Units 

Post2 

Udyam se Udyog ka Naya Bharat! Government to support Stressed MSMEs with infusion of Rs.20,000 crore equity support through Subordinate Debt 

Stressed MSMEs or MSMEs with NPA loans will be eligible 

More than 2 lakh MSMEs likely to be benefitted 

Government to infuse Rs.4000 crore in Credit Guarantee Trust Fund for MSEs 

Post3 

Big boost for the MSME Sector!Fund of Funds created to infuse equity worth Rs.50,000 crore in the MSME Sector 

A Rs.10,000 crore Corpus Fund created. 

To help potential MSMEs in expansion 

Post4 

Growth beyond leaps and bounds with new defined MSMEs- Distinction between manufacturing and services MSMEs removed. Investment limits revised upwardly. 

Criterion of turnover added. 

Breaking the shackles of old definition, MSMEs to grow leaps and bounds 

Micro enterprises – investment upto Rs.1crore and turnover upto Rs.5 crore 

Small enterprises – investment upto Rs.10 crore and turnover upto Rs.50 crore 

Medium enterprises – investment upto Rs.20 crore and turnover upto Rs.100 crore 

Post5 

Local hoga Global! In a major initiative, Global tenders to be disallowed for Government tenders upto Rs.200 crore to enable MSMEs to participate in the Government procurement process. 

Post6 

Government of India and CPSEs to clear all receivables of MSMEs in the next 45 days 

Post7 

E-market linkages for MSMEs across the board to provide marketing opportunities.  


Social Media Posts relating to other Announcements having positive impact on MSMEs. 

Post1 

Rs.2,500 crores EPF support for businesses and workersfor three more months August, 2020. This will benefit more than 3.5 lakh units and 72 lakh employees. 

Post2 

Special Liquidity Scheme for Non-Banking Financial Companies, Micro-Finance Institutions, Housing Finance Companies worth Rs.30,000 crore. 

Post3 

To cater to liquidity needs of MSMEs, Partial Credit Guarantee Scheme 2.0 for NBFCs worth Rs.45000 crore introduced. Government of India to bear the first 20% of loss. 

Post4 

Major Relief to Contractors 

All Central Agencies like Railways, Ministry of Road Transport& Highways, Central Public Works Dept, etc. to grant extensions of contracts up to 6 months without costs to contractor. 

Post5 

Expediting refunds to partnerships, proprietorship & LLPs will help the MSMEs 

Lok Sabha passes bills to free-up farmers to sell their produce anywhere

New Delhi, 18 Sept

The Lok Sabha passed two bills that would allow farmers for direct marketing their produce and to get better prices. 

Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar introduced The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 in Lok Sabha. The bills will replace ordinances promulgated in June 2020. 

The government is confident that the new laws will boost farm incomes although some farm leaders fear that farmers may be exposed to manipulation by traders and companies. 

Replying to the discussion Shri Narendra Singh Tomar said that farmers will now be freed from the restrictions of having to sell their produce at designated places only, the procurement at Minimum Support Price will continue and mandis established under State laws will also continue to operate. 

The Union Agriculture Minister said that these legislations will bring about revolutionary transformation and transparency in the agriculture sector, electronic trading will increase, there will be accelerated agricultural growth as private investment will be attracted in building supply chains and agricultural infrastructure, new employment opportunities will be created and rural economy will get a boost, which will in turn help to strengthen the national economy. 

The legislation related to price assurance will create an ecosystem where the farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce. It will open more choices for the farmer, reduce marketing costs for the farmers. It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. 

The other legislation will empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field without any fear of exploitation. It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. It will reduce cost of marketing and improve income of farmers. 

This legislation will act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to national and global markets, and in agricultural infrastructure. Farmers will get access to technology and advice for high value agriculture and get ready market for such produce, official said.

Government extends emergency credit line guarantee scheme

Government extends emergency credit line guarantee scheme

The Union Government has extended the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till November 30th, 2020, or till such time that an amount of Rs. 3 lakh crore is sanctioned under the Scheme, whichever is earlier

In view of the opening up of various sectors in the economy and the expected increase in demand during the ongoing festive season, the extension will provide a further opportunity to such borrowers who have not availed of the scheme so far, to obtain credit under the Emergency Credit Line Guarantee Scheme, the government said.

The Emergency Credit Line Guarantee Scheme was announced as part of the Aatma Nirbhar Bharat Package (ANBP) to provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, individual loans for business purposes and MUDRA borrowers, to the extent of 20% of their credit outstanding as on 29th Feb, 2020.

Borrowers with credit outstanding up to ?50 crore as on 29th Feb, and with an annual turnover of up to Rs. 250 crore are eligible under the scheme.

Interest rates under the Emergency Credit Line Guarantee Scheme are capped at 9.25 per cent for banks and financial institutions and 14% for NBFCs.

Tenor of loans provided under the Scheme is four years, including a moratorium of one year on principle repayment.

As per data uploaded by Member Lending Institutions on the ECLGS portal, an amount of Rs. 2.03 lakh crore has been sanctioned under the Scheme to 60.67 lakh borrowers so far, while an amount of Rs. 1.48 lakh crore has been disbursed.

RBI notifies centre's interest waiver scheme including MSME loans

RBI notifies centre's interest waiver scheme including MSME loans

In a bid to provide relief amid the pandemic, the Reserve Bank of India (RBI) has notified the Centre's scheme for ex-gratia payment of difference between interest on loans of up to Rs 2 crore.

"All lending institutions are advised to be guided by the provisions of the Scheme and take necessary action within the stipulated timeline," RBI said in a notification on Monday.

The Finance Ministry last week had approved guidelines for the same scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months of loans up to Rs 2 crore.

The guidelines came after the Supreme Court directed the Centre to implement "as soon as possible" interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic.

The lender will have to credit the amount to the account of the borrower on or before 5 November, giving relief to borrowers ahead of Diwali. Thereafter, the lender can claim reimbursement from the government by December 15.

Under the scheme, the ex gratia payment -- the difference between compound interest and simple interest for six months -- will be made to borrowers whose aggregate loan sanctions and outstanding is not more than Rs 2 crore as on February 29, 2020. All categories of loans -- MSME, education, housing, personal, consumer -- and credit card dues will be eligible.

The scheme can be availed by designated class of borrowers from March 1 to August 31, 2020.

Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans come under the ambit of the scheme.


TN govt waives stamp duty for MSMEs under Aatma Nirbhar Bharat scheme

A DBT for manufacturers: The Pioneer

Direct Benenfit Transfer for manufacturers: 

The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.

-by Subhash Chandra Pandey. The author is former Special Secretary, Ministry of Commerce and Industryhe author is former Special Secretary, Ministry of Commerce and Industry


The Central Government has approved production-linked incentives (PLI) for manufacturers in 13 sectors. It essentially means that if an eligible manufacturer produces and sells/exports eligible goods worth Rs 100 crore, the Government will give him Rs 5 crore (assuming five per cent incentive) as a reward/incentive because such sale/export of locally manufactured goods will create local jobs.


The PLI will be available for sale/export for the next five years in addition to the existing incentives. Now this is one of the concerns that remains for investors and would need to be addressed to make the scheme a success. As the PLI benefit has been assured only for five years, the investor has to assess the financial viability of the project beyond the PLI period. Once a manufacturing unit has been set up with a lot of fixed investment, recovery may be difficult. So the five-year period has to be utilised to make life easy for all businesses and job creators. In other words, the “ease of doing business” has to improve substantially.


The Government expects that it may be called upon to pay about Rs 2 lakh crore, which means a total sale/export of about Rs 40 lakh crore (assuming five per cent PLI rate) during the next five years. This PLI will increase local manufacturing of eligible goods by an output equal to about 20 per cent of the current GDP.


Thus, the second concern is changing growth dynamics and the global demand scenario, especially in the post-pandemic world. To get free cash of Rs 2 lakh crore from the Government, specified goods worth about Rs 40 lakh crore would need to be produced in India and a matching demand would be needed in a world where the cut-throat competition is going to deepen.


The third concern is about how much of the PLI benefit would boost the investor’s actual post-tax income. In October, the Ministry of Electronics and Information Technology (MEITY) approved PLI benefits (four per cent to six per cent) to 16 companies. The PLI is available for incremental sales of goods manufactured in India five years subsequent to the base year (FY 2019-20).


Now, whether the incentive of four per cent to six per cent of invoiced price for five years would be enough compensation to offset the cost disadvantage in India remains to be seen. One plus point in favour of the new manufacturing units is 15 per cent corporation tax that was announced last year. For them, manufacturers of highly branded products like Apple iPhones, the PLI scheme and reduced corporate tax are major incentives. Since such manufacturers face little competition for their products, they can set prices of their products on their own. The PLI benefit may or may not be fully passed on to the retail buyers in this particular case.


Most other manufacturers may face stiff price competition and may not be able to fully pocket the PLI benefit to offset their cost disadvantage. Their discerning, hard-bargaining buyers will demand price discounts on the basis of the PLI benefit.


The percentage of PLI benefit may vary across beneficiaries and depending on the competition, the post-tax actual benefit could vary from investor to investor. The PLI scheme, therefore, needs supplementation by sustained investor facilitation and improvement in ease of doing business.


Incentives like income tax and Central excise exemptions, VAT/GST reimbursements, interest and insurance subsidies, subsidies on plant/machinery and so on are typically provided for industries set up in industrially-backward areas like North-eastern states.


At present, the total manufacturing output of all items (whether PLI eligible or not) in a year is about 16 per cent of the GDP. The services sector has a 55 to 60 per cent contribution in GDP and has been a major employer so far.


The PLI will be available to all new manufacturing units and also to existing manufacturing units for their extra production, additional over baseline output. For example, existing mobiles and electronics manufacturers are entitled to PLI benefit for whatever they produce over and above the 2019-20 level production in the next five years. The manufacturing units will have to apply, register and go through a vetting process and enter into proper agreement with the Government so as to ensure that only eligible manufacturers get the incentive for actual local manufacturing.


On April 1, a PLI scheme promising Rs 40,951 crore incentive (four to six per cent of production value) was notified for manufacturers of mobile phones and other electronic components. Medical devices and bulk drugs (active pharmaceutical ingredients) were added to PLI eligibility in July and on November 11, 10 more manufacturing sub-sectors were added.


Thus, Rs 1,97,291 crore of cash incentive has been promised in the next five years to manufacturers of automobiles and auto components (Rs 57,042 crore); mobile manufacturing and specified electronics/technology products (Rs 45,951 crore); advance chemistry cell batteries (Rs 18,100 crore); pharmaceuticals and drugs (Rs 21, 940 crore); medical devices (Rs 3,420 crore); telecom and networking products (Rs 12,195 crore); processed food (Rs 10,900 crore); man-made fibres and technical textiles (Rs 10,683 crore); high-efficiency solar PV modules (Rs 4,500 crore); white goods like ACs and LEDs (Rs 6,238 crore) and speciality steel (Rs 6,322 crore).


For its move in October to approve grant of PLI benefit (four to six per cent ) to 16 companies, MEITY received a very good response from mobile handset manufacturers.


The production of mobile phones surged from about Rs 18,900 crore in 2014-15 to Rs 170,000 crore in 2018-19. Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron have been granted PLI benefit only for manufacturing high-end phones (invoice value Rs 15,000 and above). 


Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers for Apple iPhones. They expect to have a major export turnover for high-end phones. Some Indian mobile phone companies, including Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics, have also been approved for PLI.


This scheme aims to make India a manufacturing hub of global repute, reduce imports and generate employment. It covers both low-value and high-employment items like textiles and food as well as high-value and low-employment items like automobiles, mobiles, electronics, white goods, including high technology items like Advanced Chemical cell battery. Incentivising local manufacture of items like ACC battery, auto and electronics components will help India become part of the global value chains. The automobile industry turnover already accounts for almost half of the total value of manufactured items.


The auto, electronics and pharma industries, which have substantial import dependence and also high export potential, are major beneficiaries of the scheme while textiles and processed food are major employment generators.


A pertinent question is why should the Government give financial assistance of Rs 900 to a phone manufacturing company for every phone sold at Rs 15,000 (assuming six per cent PLI)? After all, more than half of the value of a phone may comprise imported components. The answer to this question is local employment.


The exports, in any case, are tax-free. Under the WTO rules, a Government can refund all taxes collected from exports so that the local taxes are not exported to foreign buyers. So, whatever Customs, excise duties and GST are paid on exported items, they are eventually refunded by the Government. Often, exporters face the problem of working capital if the refund is delayed.


There is a growing demand in the world for diversification in supply chains and India can become a major player. The promotion of the manufacturing sector means forward integration with global supply chains and backward linkages with the MSME sector.


The domestic electronics hardware manufacturing faces a lack of a level-playing field vis-à-vis competing nations. It is assessed that it costs about 8.5 per cent to 11 per cent more to manufacture these items in India on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R and D by the industry; and inadequate skill development. Sunrise sectors need support in the initial stages.


Traditionally, we have tried to attract investors with investment subsidies like giving land at concessional rates and subsidy on plant and machinery cost at a fixed percentage of say 15 per cent to 20 per cent of price. Thereafter, if the unit does not properly run, the subsidy goes waste. The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative from the Government’s viewpoint.


By Subhash Chandra Pandey (The author is former Special Secretary, Ministry of Commerce and Industry)

The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.

The Central Government has approved production-linked incentives (PLI) for manufacturers in 13 sectors. It essentially means that if an eligible manufacturer produces and sells/exports eligible goods worth Rs 100 crore, the Government will give him Rs 5 crore (assuming five per cent incentive) as a reward/incentive because such sale/export of locally manufactured goods will create local jobs.

The PLI will be available for sale/export for the next five years in addition to the existing incentives. Now this is one of the concerns that remains for investors and would need to be addressed to make the scheme a success. As the PLI benefit has been assured only for five years, the investor has to assess the financial viability of the project beyond the PLI period. Once a manufacturing unit has been set up with a lot of fixed investment, recovery may be difficult. So the five-year period has to be utilised to make life easy for all businesses and job creators. In other words, the “ease of doing business” has to improve substantially.

The Government expects that it may be called upon to pay about Rs 2 lakh crore, which means a total sale/export of about Rs 40 lakh crore (assuming five per cent PLI rate) during the next five years. This PLI will increase local manufacturing of eligible goods by an output equal to about 20 per cent of the current GDP.

Thus, the second concern is changing growth dynamics and the global demand scenario, especially in the post-pandemic world. To get free cash of Rs 2 lakh crore from the Government, specified goods worth about Rs 40 lakh crore would need to be produced in India and a matching demand would be needed in a world where the cut-throat competition is going to deepen.

The third concern is about how much of the PLI benefit would boost the investor’s actual post-tax income. In October, the Ministry of Electronics and Information Technology (MEITY) approved PLI  benefits (four per cent to six per cent) to 16 companies. The PLI is available for incremental sales of goods manufactured in India five years subsequent to the base year (FY 2019-20).

Now, whether the incentive of four per cent to six per cent of invoiced price for five years would be enough compensation to offset the cost disadvantage in India remains to be seen. One plus point in favour of the new manufacturing units is 15 per cent corporation tax that was announced last year. For them, manufacturers of highly branded products like Apple iPhones, the PLI scheme and reduced corporate tax are major incentives. Since such manufacturers face little competition for their products, they can set prices of their products on their own. The PLI benefit may or may not be fully passed on to the retail buyers in this particular case.

Most other manufacturers may face stiff price competition and may not be able to fully pocket the PLI benefit to offset their cost disadvantage. Their discerning, hard-bargaining buyers will demand price discounts on the basis of the PLI benefit.

The percentage of PLI benefit may vary across beneficiaries and depending on the competition, the post-tax actual benefit could vary from investor to investor. The PLI scheme, therefore, needs supplementation by sustained investor facilitation and improvement in ease of doing business.

Incentives like income tax and Central excise exemptions, VAT/GST reimbursements, interest and insurance subsidies, subsidies on plant/machinery and so on are typically provided for industries set up in industrially-backward areas like North-eastern states.

At present, the total manufacturing output of all items (whether PLI eligible or not) in a year is about 16 per cent of the GDP. The services sector has a 55 to 60 per cent contribution in GDP and has been a major employer so far.

The PLI will be available to all new manufacturing units and also to existing manufacturing units for their extra production, additional over baseline output. For example, existing mobiles and electronics manufacturers are entitled to PLI benefit for whatever they produce over and above the 2019-20 level production in the next five years. The manufacturing units will have to apply, register and go through a vetting process and enter into proper agreement with the Government so as to ensure that only eligible manufacturers get the incentive for actual local manufacturing.

On April 1, a PLI scheme promising Rs 40,951 crore incentive (four to six per cent of production value) was notified for manufacturers of mobile phones and other electronic components. Medical devices and bulk drugs (active pharmaceutical ingredients) were added to PLI eligibility in July and on November 11, 10 more manufacturing sub-sectors were added.

Thus, Rs 1,97,291 crore of cash incentive has been promised in the next five years to manufacturers of automobiles and auto components (Rs 57,042 crore); mobile manufacturing and specified electronics/technology products (Rs 45,951 crore); advance chemistry cell batteries (Rs 18,100 crore); pharmaceuticals and drugs (Rs 21, 940 crore); medical devices (Rs 3,420 crore); telecom and networking products (Rs 12,195 crore); processed food (Rs 10,900 crore); man-made fibres and technical textiles (Rs 10,683 crore); high-efficiency solar PV modules (Rs 4,500 crore); white goods like ACs and LEDs (Rs 6,238 crore) and speciality steel (Rs 6,322 crore).

For its move in October to approve grant of PLI benefit (four to six per cent ) to 16 companies, MEITY received a very good response from mobile handset manufacturers.

The production of mobile phones surged from about Rs 18,900 crore in 2014-15 to Rs 170,000 crore in 2018-19. Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron have been granted PLI benefit only for manufacturing high-end phones (invoice value Rs 15,000 and above). 

Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers for Apple iPhones. They expect to have a major export turnover for high-end phones. Some Indian mobile phone companies, including Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics, have also been approved for PLI.

This scheme aims to make India a manufacturing hub of global repute, reduce imports and generate employment. It covers both low-value and high-employment items like textiles and food as well as high-value and low-employment items like automobiles, mobiles, electronics, white goods, including high technology items like Advanced Chemical cell battery. Incentivising local manufacture of items like ACC battery, auto and electronics components will help India become part of the global value chains. The automobile industry turnover already accounts for almost half of the total value of manufactured items.

The auto, electronics and pharma industries, which have substantial import dependence and also high export potential, are major beneficiaries of the scheme while textiles and processed food are major employment generators.

A pertinent question is why should the Government give financial assistance of Rs 900 to a phone manufacturing company for every phone sold at Rs 15,000 (assuming six per cent PLI)? After all, more than half of the value of a phone may comprise imported components. The answer to this question is local employment.

The exports, in any case, are tax-free. Under the WTO rules, a Government can refund all taxes collected from exports so that the local taxes are not exported to foreign buyers. So, whatever Customs, excise duties and GST are paid on exported items, they are eventually refunded by the Government. Often, exporters face the problem of working capital if the refund is delayed.

There is a growing demand in the world for diversification in supply chains and India can become a major player. The promotion of the manufacturing sector means forward integration with global supply chains and backward linkages with the MSME sector.

The domestic electronics hardware manufacturing faces a lack of a level-playing field vis-à-vis competing nations. It is assessed that it costs about 8.5 per cent to 11 per cent more to manufacture these items in India on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R and D by the industry; and inadequate skill development. Sunrise sectors  need support in the initial stages.

Traditionally, we have tried to attract investors with investment subsidies like giving land at concessional rates and subsidy on plant and machinery cost at a fixed percentage of say 15 per cent to 20 per cent of price. Thereafter, if the unit does not properly run, the subsidy goes waste. The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative from the Government’s viewpoint.

By Subhash Chandra Pandey (The author is former Special Secretary, Ministry of Commerce and Industry)

Business Network: Meaning & its Objectives

A business network is a complex network of companies, working together to accomplish certain objectives. These objectives, which are strategic and operational, are adopted by business networks based on their role in the market. There are two categories of business networks — business associations and company aggregations — that help small and medium-sized enterprises (SME) to become more competitive and innovative.

Several descriptions of business networks stipulate different types of characteristics:

• A business network is a form of inter-firm cooperation that allows companies, located in different regions or countries, to collaborate on a basis of common development objectives expressed in a cooperation agreement. The companies decide to join their strengths, share information and create synergies to become more innovative and competitive in domestic and international markets, while keeping their autonomy, not creating a separate legal entity. This cooperation model is suitable for any kind of business activity or sector.

• A business network is greater than the sum of the individual businesses. It incorporates suppliers, customers, third-party developers, distributors, and others. These third parties generally have a strong reason to support the network and remain active in it.

• A business network is generic and includes both smart and not-so-smart business networks. A smart business network is defined as a group of participating companies (nodes) that are linked together by one or many communication networks (links). The companies have compatible goals and interact in innovative ways. A smart business network is perceived by each company as increasing its own value and is sustainable as a network over time.

• A business network is owned by the business enterprise, where the scope of the network is to support the informational and operational requirements of the business, such as marketing, sales, accounting, and manufacturing departments.


Business networks have two types of objectives — strategic and operational — that are adopted depending on the role of the business network in the market. 


SME Marketing Networking: A Strategic Approach.......

A strategic approach to how small and medium sized enterprises (SMEs) use their marketing networks during a time of change in their operating context.


SME networking should be analysed using the structural, relational and usage dimensions associated with network frameworks. We have to examine marketing network processes (MNPs) that are investigated through the use of network behaviour for SME management.

The development of a thematic approach in viewing a network as a strategic analytical construct allowed these MNPs to be studied in relation to the specific theme chosen and how they do their strategic marketing.

The focus should be on the use of SME network activities in relation to strategic marketing, to gain an in-depth understanding of the nature and role of strategic marketing networks in SMEs during a time of environmental change.


What is SME Networking?

......Identification of Potential Clients, Providers, and Competitors in Supply Chain Networks

A set of SMEs that cooperate by exchanging goods or information to reach a common objective.

In the last years Small and Medium-Sized Enterprises (SMEs) were driven to aggregate in industrial networks, due to the need to compete in a globalized market, but also to the aspiration to provide sufficient stability for their own small business.

SMEs belonging to networks share objectives and strategies with the other SMEs, while preserving their own individual autonomy. One of this network type is the supply chain, where companies collaborate with one or more other companies depending on the sector they belong. A typical problem in this context is to evaluate the place of a new SME inside the network, i.e., the number of potential clients, suppliers and competitors that the SME would have. The goal of this work is to offer an method to analyze the potentiality of existing SME networks based on public information available on the Web.

One of the most significant paradigm of modern business management is that individual businesses no longer compete as solely autonomous entities, but rather as supply chains. In today’s global marketplace, rapid technology development, globalization and customers’ varied expectations are changing the type of markets' competitions and firms no longer compete as independent entities with unique brand names, but rather as integral part of supply chain links.

In this work, an ontology representing the relationships among activities performed in a supply chain is defined and used to detect the potential relationships among SMEs in a network.


Virtual buyer-seller meet with Germany to boost export of GI & organic agri produce

Aiming to promote the export of agricultural products, Agricultural and Processed Food Products Export Development Authority (APEDA) in collaboration with the Embassy of India, Berlin and German Agribusiness Alliance organised a virtual buyer-seller meet on Wednesday.

On the occasion, Paramita Tripathi, Deputy Head of Mission, Embassy of India, Berlin, Dr. M Angamuthu, Chairman APEDA and Julia Harnal, Chairperson, German Agribusiness Alliance addressed the participants.

The event was organised by Agricultural and Processed Food Products Export Development Authority (APEDA) in collaboration with Embassy of India, Berlin and German Agribusiness Alliance. More than 70 participants participated in the event.

Chairman APEDA in his address gave emphasis on the potential of Indian GI and Organic products as well as processed products. Paramita Tripathi, Deputy Head of Mission, Embassy of India, Berlin laid emphasis on the larger presence of Indian horticulture for their unique taste & qualities.  

The event comprised of presentations by the Indian side on the strength of Indian agricultural products in exports specifically grapes and fresh fruits and vegetables. From the German side, there were presentations on the requirements and expectations of the German market. 

The event provided a platform to showcase India’s strength in the export of fresh fruits and vegetables to further strengthen the confidence of the German buyers in Indian agri products and facilitate exports.

APEDA under Ministry of Commerce and Industry facilitates export of its scheduled agricultural and processed products through several export promotional activities. 

During the Covid19 pandemic period, APEDA continued its endeavour to promote the export of agricultural products through the virtual medium. Several virtual buyer-seller meets were organised with the importing countries in association with the Indian Missions abroad.

FAQ on Startup India Portal of SME Aspire.

What is Startup India Portal of SME Aspire?

Startup India Portal of SME Aspire is going to be a one-stop platform for all stakeholders in the Startup ecosystem to interact amongst each other, exchange knowledge and form succesful partnerships in a highly dynamic environment.

How do Investors add value to Startups?

Investors particularly venture capitalists (VCs) add value to startups in a lot of ways:

1. Stakeholder Management: Investors manage the company board and leadership to facilitate smooth operations of the startup. In addition, their functional experience and domain knowledge of working and investing with startups imparts vision and direction to the company.

2. Raising Funds: Investors are best guides for the startup to raise subsequent rounds of funding on the basis of stage, maturity, sector focus etc. and aid in networking and connection for the founders to pitch their business to other investors.

3. Recruiting Talent: Sourcing high-quality and best-fit human capital is critical for startups, especially when it comes to recruiting senior executives to manage and drive business goals. VCs, with their extensive network can help bridge the talent gap by recruiting the right set of people at the right time.

4. Marketing: VCs assist with marketing strategy for your product/service.

5. M&A Activity: VCs have their eyes and ears open to merger and acquisition opportunities in the local entrepreneurial ecosystem to enable greater value addition to the business through inorganic growth.

6. Organizational Restructuring: As a young startup matures to an established company, VCs help with the right organizational structuring and introduce processes to increase capital efficiency, lower costs and scale efficiently.

Why do Investors invest in Startups?

Investing in startups is a risky proposition, but the low requirement for overhead capital combined with high upside potential, makes it lucrative for investors to put their bets on startups.

The Thomson Reuters Venture Capital Research Index replicated the performance of venture capital industry in 2012 and found that overall venture capital has returned at an annual rate of 20% since 1996 – far outperforming modest returns of 7.5% and 5.9% from public equities and bonds respectively.

Can a foreign company register under Startup India hub?

Any entity having atleast one registered office in India is welcome to register on the hub as location preferences, for the time being are only created for Indian states. However, we are working on international relations and will soon be able to enable registration for stakeholders from the global ecosystem


Startup India Campaign of GOI

Startup India is an initiative of the Government of India. The campaign was first announced by Indian Prime Minister, Narendra Modi during his 15 August 2015 address from the Red Fort, in New Delhi.


  • The action plan of this initiative is focussing on three areas:

  • Simplification and Handholding.
  • Funding Support and Incentives.
  • Industry-Academia Partnership and Incubation.

An additional area relating to this initiative is to discard restrictive States Government policies within this domain, such as License Raj, Land Permissions, Foreign Investment Proposals, and Environmental Clearances. It was organized by The Department for promotion of industry and internal trade (DPI&IT).


A startup defined as an entity that is headquartered in India, which was opened less than 10 years ago, and has an annual turnover less than ?100 crore (US$14 million).


Under this initiative, the government has already launched the I-MADE program, to help Indian entrepreneurs build 10 lakh (1 million) mobile app start-ups, and the MUDRA Bank's scheme (Pradhan Mantri Mudra Yojana), an initiative which aims to provide micro-finance, low-interest rate loans to entrepreneurs from low socioeconomic backgrounds.


Initial capital of ?20,000 crore (equivalent to ?230 billion or US$3.2 billion in 2019) has been allocated for this scheme.

Fund Raising: FAQ on Startup in India

Funding: Frequently Asked Questions (FAQs)

1. How to raise funds for startups in India?

If you have a business idea that can change the world with its innovative methods, there’s no need to worry about the finances. There are multiple methods through which you can raise funds for startups in India including,


Angel Investors

Crowdfunding

Incubators & Accelerators

Philanthropic Impact Funds

Bootstrapping

Loans

Learn more about raising funding for Indian startups here. 



2. How to get funding for Startup India businesses?

Startup India businesses can raise funding for their startups through any of the methods like crowdfunding, angel investments, incubators & accelerators, bootstrapping, etc. However, for raising funding for Startup India businesses, it is necessary to,


Gain financial clarity

Complete documentation

Research market

Prepare pitch

Network

Read more about how to get funding for Indian startups here.


3. How to start a startup company in India?

India, being a startup-friendly nation, has made the process of starting startups in India accessible and smoother. To start a startup company, you need to register it as a Partnership, LPP, or Private Limited Company, following which you need to get registered under the Startup India Scheme.


4. How to get a loan for Indian startups?

There are several government loans that you can avail of if you fulfill their eligibility criteria. Some of the best schemes and loans offered by the government for MSMEs Indian startups are:


Pradhan Mantri Mudra Yojana

Standup India Scheme

Credit Guarantee Scheme

Bank Credit Facilitation Scheme

Sustainable Finance Scheme

 

5. Which ministry does the Startup India Scheme come under?

The Startup India Scheme comes under the Union Ministry of Human Resource Development focuses on the Startup India initiative as per the ‘Industry-Academia Partnership and Incubation’.


6. How can I get funding from Startup India?

There are multiple ways of accumulating funding from Startup India, which include taking loans from the bank under the Startup India Scheme, crowdfunding the startup, looking for angel funding, as well as gathering funds through seed funding rounds.


7. What is the meaning of Startup India?

Startup India is an initiative taken by Government of India that focuses on promoting the entrepreneurial spirit amongst individuals by providing them financial and mental support in starting up. Essentially, the Startup India platform acts as a bridge, helping connect investors with entrepreneurs.


8. How can I start my own Startup in India?

Starting a startup in India involves going through multiple stages of planning and plotting your business idea into a reality.


To start a startup in India:

Create a business idea

Research market

Strategize business plan

Create a prototype

Look for funding

Start your startup


9. Who can register in Startup India?

A company fulfilling the criteria given below can register for Startup India:

A company with a period of existence & operations below 10 years from the Date of Incorporation

A Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership

Holds an annual turnover of less than Rs 100 crore

Must be an original entity

The business model must be innovative and scalable

 



Top 40 Shortlisted Startups By Data information Bazaar 2020

Top 40 Shortlisted Startups

DATA INNOVATION BAZAAR 2020

Agriculture

• Amruta Behera

• DAYBEST RESEARCH PRIVATE LIMITED

• FLIC FARM PRIVATE LIMITED

• Innogle

• Krushak Mitra Agro Services Private Limited

• Sensegrass Inc

• Statlogic India Private Limited

• Stellapps Technologies Private Limited

Connected Homes/Buildings/ Offices

• Arpit Asthana

• SNAS IoT Laboratories Pvt Ltd

Education

• 11Signals Technologies Pvt Ltd

• EDUBUK

• EDUREV LEARNING PVT LTD

• Paraclete Image Labs Pvt Ltd

• ShilpMIS Technologies Pvt Ltd

Energy and Environment

• Dibyajyoti Dash

• Energeia Microgrid Private Limited

• Marjan Machinery

• Pingala AI Private Limited

Healthcare

• Aarca Research Pvt Ltd

• AarogyaAI

• Bioscan Research

• DeepBrainz Technologies Private Limited

• EMPIEZO IT SOLUTION Pvt Ltd

• MedMarvel Software Solutions Pvt Ltd

• Robo Bionics

Logistics

• Logesh

• NOOS Technologies Pvt Ltd

• Virtual Shipment

Next Generation Connected Transportation

• kshemin

• Smart Reservoirs & Vessels using IoT and Blockchain Technology

Smart Cities

• Agua Wireless Systems Private Limited

• ANUKAI SOLUTIONS PRIVATE LIMITED

• April.iO

• MinionLabs

• Quantaflux Technology Solutions Private Limited

Smart Videos

• DeepTech AI Labs Pvt Ltd

• DIYCAM India

• Sanganak Labs

• Uncharted Infolabs Private Limited


Parliamentary Committee recommends measures for financing the Startup Ecosystem

Parliamentary Committee recommends measures for financing the Startup Ecosystem

By Nasscom Community on September 26, 2020

Introduction On 9 September 2020, Parliamentary Standing Committee on Finance (PSC) headed by Shri Jayant Sinha presented its report on ‘Financing the Startup Ecosystem’ to the Honorable Speaker, Lok Sabha. The PSC looks at various topics including financing the innovation ecosystem.

The Startup India initiative, managed by the Ministry of Commerce, Department for Promotion of Industry and Internal Trade (DPIIT) was launched on 16th January, 2016 with an objective to build a strong ecosystem for nurturing innovation and startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. Since then, various taxation reforms such as reduction in corporate tax rate, exemption from payment of Minimum Alternate Tax (MAT), abolishment of Dividend Distribution Tax (DDT), 100% deduction of profits for start-ups for up to 3 out of 10 years, and administrative reforms such as start-up cell for grievance redressal and simplified assessment procedures have been provided to the startup ecosystem in India.

The report recognizes the enabling nature of the startup ecosystem towards flow of high-impact innovations into the economy leading to creation of jobs and wealth. Moreover, access to finance is one of the major roadblocks for the growth of startup ecosystem in India. Keeping in view that startups and innovators are driving the next wave of innovation and new ideas need support and financing now more than ever, the role of Private Equity/ Venture Capital, larger companies, High Net-worth Individuals (HNI), family offices, and other institutional investors needs to be encouraged. In furtherance of this, the report recommends certain measures that will act as a catalyst to enhance liquidity in the market and boost capital influx in the economy, which is a critical requirement to tide over the liquidity crunch during the ongoing Covid-19 crisis. Although the recommendations of the Committee are not binding, they hold significant importance in formulating future government actions.

Recommendations

1. Abolish Long Term Capital Gains (LTCG) Tax for all investments in startup companies made through Collective Investment Vehicles (CIV) for at least next two years.

After 2 years, Securities Transaction Tax (STT) may be applied to CIVs so that revenue neutrality is maintained. Startups in this case will be as per the designation granted by DPIIT. The committee has added that once the pandemic period concessions are lifted, CIV capital gains should be taxed at the same rate as listed securities. This has come in response to startups’ ask for removing disparity in taxation of LTCG for domestic investors (@20%) versus foreign investors (@10%) as well as the disparity in LTCG tax for investment in listed securities versus unlisted securities.

2. Setting-off management fees on returns to investors, i.e., AIF management fees will be deducted before computing capital gains. Currently, any services availed by an AIF located in India (even if it comprises of overseas investors) are liable to GST. GST paid on fund management fee becomes a sunk cost, thereby impeding investments in India. However, Ministry of Finance is of the view that as per the place of supply provisions under GST, place of supply of such service is in India. It does not violate principle of destination-based consumption tax under GST Law.

3. Mobilisation of Domestic Institutional Funds: The Committee recommended several measures to encourage large financial institutions in India to invest a portion of their surplus into domestic funds, in order to bring in additional domestic capital for startups. This has come in furtherance of reducing India’s reliance on foreign investment (especially from the US and China).

a. Pension Fund Regulatory and Development Authority (PFRDA) and National Pension Scheme (NPS) may be encouraged to invite bids from professional fund managers for running a fund-of-funds program. Small Industries Development Bank of India (SIDBI) would be eligible to participate as well.

b. Remove restrictions such as minimum corpus of AIF as an eligibility criterion for pension fund investment and requirement to invest only in listed AIFs.

c. Major banks should come together to float a fund-of-funds. Furthermore, the current exposure limits applicable to banks need to be enhanced and permission be granted to invest in Category III AIFs also.

d. Insurance companies (both life and non-life) must be given latitude to invest in fund-of-funds by Insurance Regulatory and Development Authority of India (IRDAI) as well as directly in Venture Capital (VC)/ Private Equity (PE) funds along with a higher exposure cap.

e. Investments by insurance companies in AIFs must be carved out under a separate category while calculating the applicable exposure limits and must not be clubbed with other investments under ‘unapproved investments’.

f. Foreign Development Finance Institutions may also be encouraged to participate with local asset management companies to set up fund-of-funds structure or direct VC/PE funds, particularly in social impact, healthcare and venture/startup sectors.

4. Expansion of Sectors under Foreign Venture Capital Investor (FVCI) route: sectors in which FVCIs can invest should be expanded to include all sectors where Foreign Direct Investment (FDI) is permitted. Currently, it is permitted only in certain sectors, such as, biotechnology, IT related to hardware and software development, nanotechnology etc. This is a move towards attracting capital in the country thereby boosting the economy. The committee recognized the need to allow issuance of hybrid securities, which bear characteristics of both debt and equity under the FDI route. It recommends that this can be done for at least a limited period of time to enhance fund-raising capabilities. Currently, foreign investors/pooling vehicles are allowed to invest only in equity capital or instruments which are compulsorily convertible into equity under the FDI route.

To reduce dependence on foreign capital, the committee recommends creating several large domestic growth funds powered by domestic capital to support India’s unicorns, including the expansion of SIDBI Fund-of-Funds. These funds should be managed by sector-specific qualified management teams.

The committee recommends that SEBI should allow VC funds to invest in Non-Banking Financial Companies (NBFCs) and allow NBFCs to list on stock exchanges to be able to draw in a larger investment pool. This will help in providing more access to capital by NBFCs. The committee recommends that the exemption from income on investments made by Sovereign Wealth Fund of foreign governments before 31 March 2024, subject to the investment being held for a period of at least 36 months as per the Finance Act, 2020, should be provided to long-term and patient capital invested across all sectors. Currently, this exemption is applicable only for infrastructure related projects.

The committee recommends that the Department of Economic Affairs should set up an expert committee to provide pricing guidelines to government authorities. Currently, pricing guidelines prescribed under the various laws and regulations by SEBI, Income Tax Act, Companies Act, Foreign Exchange Management Act (FEMA) have no consistent valuation approach and create interpretational complexities. To expand the sources of capital for startup financing, the committee recommends that companies and LLPs should be allowed to invest in startups without being classified as NBFCs by the RBI. Currently, a listed company may be qualified as NBFC if their assets or income from financial assets exceeds 50%. As per the recommendation, only debt-free companies will be allowed to invest in startups. This will ensure that companies and LLPs cannot use borrowed funds for further investments. Their investments will have to be made by either through equity contributions from investors or through internal accruals. Additionally, LLPs should not be classified as a Collective Investment Scheme (CIS) by SEBI, as long as they have less than 20 members. Currently, there is not cap on the number of members to be able to qualify as a CIS. Industry engagement To take positive actions in certain areas, the committee encourages the industry to submit the following: Proposal on ‘Mid-Market Permanent Capital Vehicles/Permanent Capital Vehicles’, in the context of creating permanent sources of capital for the startup ecosystem. Concept note on the issues pertaining to insurers’ investments in AIFs, to be submitted to IRDAI.

The post Parliamentary Committee recommends measures for financing the Startup Ecosystem appeared first on NASSCOM Community |The Official Community of Indian IT Industry.


SAP raising investments in India, Focus on Start-ups, SMEs

TransUnion CIBIL, MoSPI launch MSME Credit Health Index

TransUnion CIBIL, MoSPI launch MSME Credit Health Index

The MSME sector has seen an increased level of NPAs in the last two years consequent to a slower rate of economic growth. Cash flows of MSMEs have been impacted over a period of time thereby limiting their ability to service debts.

Analysis of MSME Credit Health Index at a sub-segment level shows that the momentum of growth, when compared to the benchmark for each sub-segment of MSME, is highest for the Micro segment.

MUMBAI: In order to provide a measure of the growth and strength of the MSME sector in India, TransUnion CIBIL in partnership with Ministry of Statistics & Programme Implementation (MoSPI) has launched MSME Credit Health Index.

The MSME Credit Health Index will provide government, policy makers, lenders and MSME market participants, a numeric indicator for benchmarking the health of the MSME sector. This measurement model will facilitate better MSME credit risk management, formulation of strategies and policies to support the revival and resurgence of the MSME sector and the economy.

The MSME Credit Health Index is built using credit data submitted by lending institutions to TransUnion CIBIL. The index measures the credit health of India’s MSME industry on two parameters: growth and strength. Growth is measured by plotting increase in exposure value (outstanding balances) over time and strength is measured by decrease/increase in credit risk in terms of non-performing assets (NPA). Both the growth and strength indices follow the principle of higher the better – i.e. an increasing Growth Index indicates improvement in credit growth; and an increasing Strength Index implies better asset quality and therefore denotes an improvement in the structural strength of the sector.

In a statement, Kshatrapati Shivaji, Secretary, MoSPI said, “The MSME sector comprises of over six crore enterprises, contributes nearly 29% of India’s Gross Domestic Product (GDP) and provides employment to over 11 crore workers. It is important to continuously monitor and measure the strength, growth and progress of the MSMEs, so that policies can be aligned and timely interventions taken.”

The first version of the MSME Credit Health Index is based on data from March 2018 to June 2020. Rajesh Kumar, MD and CEO, TransUnion CIBIL, in a statement said, “The Index is available at national level and granularly across MSME segments, lender categories and geographies. The ongoing monitoring of the index will provide insights for aligning strategies and policies towards efficient implementation of funds and resources for sustained development of the MSME sector.”

Overall analysis of the Growth Index reflects muted growth in June 2020 owing to limited credit activity consequent to the containment measures implemented by the Government to curb the spread of COVID-19 pandemic.

The MSME sector has seen an increased level of NPAs in the last two years consequent to a slower rate of economic growth. Cash flows of MSMEs have been impacted over a period of time thereby limiting their ability to service debts. This has resulted in the Strength Index reflecting a decreasing trend. The improvements seen in March are due to improved recovery and collection efforts by lenders before the close of financial year.

Digital lending innovation directly proportional to growth

Analysis of MSME Credit Health Index at a sub-segment level shows that the momentum of growth, when compared to the benchmark for each sub-segment of MSME, is highest for the Micro segment (exposure less than Rs 1 crore). A look at the Strength Index by MSME size reveals that the Index values across all segments have reached the same level in June 2020, while following a different trajectory in the last two years. In the pre COVID-19 quarter of December 2019, the strength was the lowest for the Medium segment. However, an increased focus on recoveries before the end of financial year resulted in the strength of Medium segment improving significantly for the March 2020 quarter.

At a lender category level, NBFCs and Private Banks have shown a higher growth momentum. Private banks have contributed to over 50% of incremental credit to the MSME sector over the last two years. NBFCs were the fastest growing category in 2018. The liquidity crisis towards the end of 2018 limited the ability of NBFCs to extend credit. As a consequence, NBFC credit growth slowed down in 2019. Public Sector Banks have seen a muted credit growth in the last two years.

The Strength Index by lender category reflects a relatively faster decline for private banks driven by few players experiencing higher stress in their portfolio compared to others. However, the NPA rates of private banks, despite showing an accelerated increase, continue to be at much lower level compared to PSU banks and NBFCs.


SBI setting up e-commerce platform for MSMEs

SBI setting up e-commerce platform for MSMEs


Right strategy, governance and technology need to be adopted to mitigate the problems of Micro, Small and Medium Enterprises (MSMEs) said, SBI Managing Director CS Setty.

He said this during a virtual conference-cum-exhibition with the theme ‘Connect with World of Opportunities’ on Friday organised by the Confederation of Indian Industry (CII), Andhra Pradesh.

''SBI is planning to set up an e-commerce portal Bharat Craft to market the products manufactured by MSMEs with the facility of financing options to meet their business requirements,'' he added.

AP MSME Development Corporation Chief Executive Officer R Pavana Murthy said the MSME sector has emerged as a highly vibrant one of the Indian economies and in recent years it has achieved a higher growth rate.

He further said that MSMEs play a crucial role in providing large scale employment with a comparatively lower capital and help in industrialisation of rural and backward areas, thereby reducing regional imbalances, assuring equitable distribution of national income and wealth.

Murthy also mentioned that the Andhra Pradesh government has laid emphasis on development of infrastructure by setting up three major seaports, an international airport, and upgrading airports in the state, which will generate huge business opportunities for MSMEs.

Referring to the vision of Prime Minister Narendra Modi to make India a manufacturing hub, Visakhapatnam Special Economic Zone (VSEZ) Development Commissioner A Rama Mohan Reddy said VSEZ provides a single-window clearance and encourages MSMEs to set up units in the SEZ at very reasonable land cost.

CII AP chairman D Ramakrishna felt that industries need to take advantage of digital trade fairs, exhibitions and conferences to explore the business opportunities in the current scenario.

Indifi Technologies and PayU roll out a short-term fund to address the short-term credit needs of MS

Access to credit is one of the major challenges that continues to haunt the micro, small, medium, and large enterprises (MSMEs). To solve this, the fintech platform Indifi Technologies has come up with a short-term credit solution designed to address the short-term credit needs of the MSMEs in partnership with PayU. 

The early credit product is a short-term fund that small business owners can avail. It will be credited to their account every Friday based on the anticipation of the previous weekend sales, according to a statement by the company. 

PayU’s 4.5 lakh merchants can avail credit amount starting from Rs 25,000 up till Rs 50 lakh. 

Once credited, these merchants can ensure that all their weekend operations are managed without any hassle.

http://bwdisrupt.businessworld.in/article/Indifi-Technologies-And-PayU-Address-Weekend-Working-Capital-Woes-With-Their-Product-Early-Credit-/26-11-2020-346620/

Read more at: https://yourstory.com/smbstory/indifi-technologies-payu-msmes-short-term-credit