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Small is beautiful

PRIME Minister Narendra Modi''s policy decision that promises micro, small and medium enterprises (MSME) to get hassle-free loans in 59 minutes is a good economic decision, which legitimately aims to woo an important political constituent of the ruling party ahead of the 2019 General Election.

Small is beautiful


PRIME Minister Narendra Modi's policy decision that promises micro, small and medium enterprises (MSME) to get hassle-free loans in 59 minutes is a good economic decision, which legitimately aims to woo an important political constituent of the ruling party ahead of the 2019 General Election. After the informal sector, the MSME is the backbone of the economy in terms of providing gainful employments to millions of Indians. The efforts to handhold it for hassle-free finance, assured work-orders and freedom from the Inspector Raj will not only boost the country's manufacturing sector, but also help in reducing India's burgeoning imports. Although the latest World Bank report indicates that India leapfrogged 23 spots to the 77th rank in the Ease-of-Doing-Business rankings in the perception of the global business giants, PM Modi's 12-point policy decisions announced on Thursday will change the ground realities for the local entrepreneurs, who are often ignored in the reckoning of multilateral agencies. 

 The easy access to cheap finance up to Rs 1 crore will be of immense help for the small businesses in unlocking their true potential with minimal risks to banks compared to their corporate clients whom they gave thousands of crores of loans without adequate collaterals, one of the prime reasons for accumulated NPAs  worth over Rs 10 lakh crore. While the move will help small export-oriented manufacturing units, the government should also hasten the process of input tax credit under the GST regime to ease the liquidly crunch of exporters. The directive that public sector firms will compulsorily procure 25 per cent from MSMEs should not only be enforced strictly, but the government may also consider extending it to the private sector, not through compulsion, but by giving them tax incentives.

 The government must not, however, push the banks to lend indiscriminately by providing targets, because ignoring prudential norms might lead to fresh NPAs, which the country cannot afford. Besides, it should be the responsibility of all stakeholders to ensure that the loan is extended for legitimate business purposes and it is serviced as proposed.

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