Atmanirbhar Bharat: Some practical steps to boost manufacturing in MSME sector

manufacturing MSME
A manufacturing revolution is needed to achieve the government’s target of achieving self-reliance.

Indian economy needs a paradigm shift if it were to become atmanirbhar or self-reliant. The manufacturing sector needs to be given a leg-up to ensure that the country can meet the consumption needs of its 1.3 billion population. This is an eminently possible mission if the irritants are removed and a systemic approach to resolving issues is adopted. The approach to achieve the target is two-pronged — attract new investors and resolve issues to encourage existing businesses to expand as well as to venture in new avenues.

Building on existing ventures

To become a manufacturing hub, it is important to create clusters that manufacture specialised goods like FMCG, become a part of a global supply chain, and start service sector MSMEs. There is a need to have a holistic approach and the authorities must provide facilities such as transport of workers, parking, loading/ unloading facilities, night parking and rest rooms. It may sound mundane, but these present a big hurdle to achieving economies of scale. There is also a need to have packaging and logistic arrangements in the form of ancillary industries.

The making of hub will not require any additional fund. The stamp duty share being paid to urban and local bodies can be diverted for two years to develop the facilities at dedicated hubs. The financial resources are sufficient and the projects can be completed in months using pre-cast construction technology that is steel intensive. The abandoned malls can be used as trading points with each floor specializing in a product.

Focus on MSMEs to strengthen expand existing hubs

MSMEs generate maximum employment and liquidity and hence consumption.

  1. Subsidiary payment should be real time in these days of internet banking and digitised networks.
  2. Private industrial parks can be encouraged to become hubs for packaging and trading facilities along with logistical support. The parks should have water, electricity and space for the entrepreneurs to start off or expand businesses.
  3. Rationalise taxation as production is in the limits of urban local bodies and are subjected to double taxation in terms of sandharan kar and VAT.
  4. Need to relook at Gumasta Act as customer behaviour has changed and they consume more on public holidays. Concept of more than one shift for production and optional weekly off should get a look in.
  5. Industrial accidents are not recorded as crime in Rajasthan and also clarified in judgement of Kerala, hence no FIR be initiated till evidence of criminal negligence is proved in preliminary enquiry process.

Industry needs support

  1. Common facilities at the outskirts of industrial areas for loading, unloading , night stay, night loading and unloading, parking, logistic clearances, export clearances, and dry ports can be developed under performance grant, panchayat funds supported by stamp duty funds of the state. Local panchayats can then charge the industry for usage, thereby adding another revenue source.
  2. Power tariff to industry needs to be rationalised. SEZs get power at Rs 4 per unit while industry gets at Rs7 a unit. Chhattisgarh and Punjab have given discounts of Rs 1.40 per unit for steel sector.
  3. Regular Samvardhan Board meetings at district level as a grievance redressal mechanism. On the lines centralisation of decision making due to merger of AKVN with that of Industrial Development Corporation, no separate line department of MSME need for quick resolution.
  4. Seasonal industry should be allowed to use facilities of other units during available periods.
  5. Tender conditions should have a relook on over emphasis on turnover. Consortiums can be one solution for wider participation in tenders.
  6. Increase in VAT as per feedback has resulted in diversion of traffic, and hence may need a relook.
  7. Real Estate: Need to rationalise 45% of the value to customer goes in tax besides double stamp duty by builder and then by the buyer of property. This can be developed on the lines of GST to offer input credit. This will give a fillip to the real estate industry.

These steps will trigger the expansion of local businesses, ventures in new areas, and boost local employment and wealth. There are some regulatory issues that need constant correction to facilitate the MSME sector.

(Dr Aruna Sharma is a development economist based in New Delhi. She is a former secretary, government of India.)

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