Rakesh Rewari, Executive Director of SIDBI talks about how the budget holds good prospects for the SME sector
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| Rakesh Rewari |
What are the areas where the Union budget has impacted the MSME sector the most?
For the benefit of MSME sector in India, the Government has made certain announcements in the Union Budget 2010-11, some of which include provision of 5,000 crore to SIDBI for refinancing incremental lending by banks to MSEs, creation of 100 crore with SIDBI as “India Microfinance Equity Fund” for providing equity to smaller MFIs, particularly for those operating in under served areas. These steps would enhance the credit availability to MSME sector and growth opportunities for MFIs.
The Budget announcement of Extension of Mega Cluster Scheme for development of leather products, setting up of Seven mega leather clusters during the year 2011-12 and including Jodhpur for the development of a handicraft mega cluster are welcome steps. The cluster approach is one of the key drivers of economic growth. Different ministries, institutions like SIDBI, NABARD etc., and international organizations like UNIDO, ILO have adopted cluster based approach for development of MSMEs.
Further, in order to encourage innovations in the MSME sector in India, a National Innovation Council has been set up to prepare the road map for innovation in India and the Budget has proposed to set up a State Innovation Council in each State and Sectoral Innovation Councils. An additional allocation of ` 500 crore to the National Skill Development Fund would facilitate in filling the skill gap in the MSME sector and contribute towards meeting the target of creation of 15 crore skilled workforce by 2022. On the fiscal front, the reduction in surcharge from 7.5% to 5% on corporate tax on domestic companies and reduction in custom duty in certain sector would also benefit MSME sector.
How is this 5,000 crore fund allotment to SIDBI going to help the MSME?
The Micro and Small Enterprises are vital for furthering the objective of equitable and inclusive growth as this sector is employment intensive and helps in increasing production and generating employment with low capital base.
SIDBI would utilise this amount of 5,000 crore as refinance to banks and SFCs for meeting their incremental lending to the Micro and Small Enterprises, which would result in doubling the quantum of credit from banks to MSEs. I would like to mention here that Government of India had extended 4,000 crore each during FY 2008-09 and FY 2009-10. The refinance to banks was used for funding 50 per cent of their incremental credit to MSEs which resulted in increasing the flow of credit to MSEs by double the amount of refinance from SIDBI.
How do you evaluate the proposed rural broadband connectivity to the village Panchayats?
The Government’s decision to take the rural broadband connectivity to all the 2.5 lakh Panchayats in the country in next three years is a right step towards inclusive growth, which will provide much-needed empowerment to the rural India through speeding access to information. Also, the emphasis on the use of technology/ Internet for e-governance will bring effectiveness; usher in transparency and efficiency in the socio-economic system. The rural broadband connectivity would also help MSMEs to reach to rural consumers through e-marketing and selling of products through web –portals etc.
The broadband coupled with banking technology platforms will enhance easy and secured banking services.
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