MSME Status to Retailers & Wholesalers: Government
The Modi government has revised its guidelines, giving retail and wholesale traders MSME status. MSME is Micro, Small, and Medium Enterprises. On 2nd July 2021 (Friday), Nitin Gadkari, the Minister of MSME, announced that the government has decided to provide these traders with the same benefit.
What is MSME?
MSME is a Micro, Small & Medium Enterprises sector, and this sector is one of the critical sectors for development. This sector plays a crucial role in providing substantial employment opportunities while helping the industrialization of backward and rural areas. The industry contributes to socio-economic development by reducing regional imbalances and giving rise to equitable distribution of income.
The MSMED Act (Micro, Small & Medium Enterprise Development Act) came to force in 2006 to address this sector. The primary role is to develop and promote these enterprises by the government to survive in the domestic market and enhance people's living standards.
Revised guidelines in 2017 removed the retailers and wholesalers from under the category of MSME backed up with the logic that these traders are neither manufacturers nor service providers. This move prevented them from procuring Udyog Aadhaar Memorandum (known as the MSME registration). The government is committed to strengthening MSMEs, making them the engines for the economic growth of India.
These revised guidelines would benefit around 2.5 Cr retailers and wholesalers. The retail and wholesale traders will now be able to register as MSME from Udyam Registration Portal.
What are few benefits that wholesalers and retailers would receive as MSMEs?
The Government of India has announced various schemes under the Act to help the sector, which retailers and wholesalers can benefit. These benefits will also help those traders who were adversely affected due to the COVID19 pandemic.
MSMEs can benefit from PSL, i.e., Priority Sector Lending, which they can avail themselves of as per revised guidelines. Retailers and wholesalers can also benefit from Udyam Registration Portal, which was launched in 2015 as a one-page registration form to provide hassle-free solutions for the traders.
They are also eligible for benefits like exemption of direct tax laws, subsidy on bank loans, concession on electricity bills, support for advancements in technology, infrastructure facilities, access to modern management practices, appropriate training facilities to upgrade skills.
The MSME schemes also assist with better access to export markets for domestic traders. Therefore, giving rise to exports from India.
What are a few concerns raised by the industry experts?
Even though the initiative is commendable, there are few lopsided views to the same, like the inclusion of 2.5Cr traders would dilute the industry that is already vast and is struggling for growth or even survival. The issue rises as MSMEs are already not classified as manufacturers or service units; hence this step could further complicate it and might lead to mismanagement.
Furthermore, with the Covid-19 hit, manufacturing and service sector units are already struggling for survival. The addition of other traders will lead to sharing of benefits moving the sector downwards, which might also weaken Priority Sector Lending.