• Budget 2020 must offer MSMEs digital, physical infrastructure to help them ‘think bigger, store better’

    Budget 2020 must offer MSMEs digital, physical infrastructure to help them ‘think bigger, store better’

    Union Budget 2020 India | Ease of Doing Business for MSMEs: With the economy in a slowdown spiral, this is an opportune time for the government to grant wings to SMEs who have battled with lower credit woes and thriving international competition, for survival. The government’s demonetization drive lowered the confidence of small businesses that are largely dependent on cash liquidity. As the industry eyes structural changes to weed out grassroots challenges, the Nirmala Sitharaman-led budget 2020 could prove to be the ideal platform to handhold and nurture a sector the government so dearly wishes to favour.

    Technology Upgrade

    It is widely evident that digitization needs to be incorporated at each step of the business cycle. India is at a juncture of explosive growth possibilities and to win global business, technology is the enabler that can put Indian SMEs ahead of the curve. The government could introduce schemes that promote tech-upgradation among SMEs to improve their capabilities. Additionally, while the government has taken bold steps to ease the passage for payment gateways and neo-banks, SMEs need to be handheld further to adopt efficient tech-driven business practices. This can be done in two ways: technology startups can play an important role in introducing new innovations in the business-practices field, while the government introduces strict compliance rules regarding the digitization of accounts, processes, deliveries and trade, to encourage further transparency.

    Upskilling

    With the world’s youngest working population, a trained workforce could prove to be India’s biggest competitive advantage. A Future of Jobs report states that more than half of India’s workforce will need to be reskilled by 2022 to meet the demands of the Fourth Revolution. Last year, the government announced an initiative to train 4 lakh youth via the PRIME platform, requiring an investment of Rs 436 crores. While this is a step in the right direction, further upskilling initiatives in collaboration with private entities could help develop sector-focused skilling competencies. At the grassroots level, a large section of the population requires basic digital upskilling to meet the demands for skilled professionals in upcoming fields like big data and machine learning. Budget 2020 must address this with a vision of India’s sustained inclusive growth and development.

    Better Infrastructure

    India has an acute lack of online and offline infrastructure management. SMEs face a lack of storage and warehousing capabilities, which restricts their ability to procure and ship more. An infrastructure plan that enables SMEs to ‘think bigger, store better’ could be an enabler. Further, digital infrastructure such as basic public Wifi and centralized communication systems to improve business and the economy’s agility need to find mention in the budget.

    WTO-Compliant Export Promotion Policies

    With the existing Foreign Trade Policy 2010-15 under Nirmala Sitharaman, the Indian government has done little to create an ecosystem that enables export-focused manufacturers, restricting options for exporters looking to source locally. On the other hand, Asian counterparts have largely benefitted from exporter-friendly duty structures without being dependent on subsidies alone. Measures to introduce export promotion schemes are needed in the budget at a time when low global demand is dampening sentiment. With the popular Merchandise Export from India Scheme (MEIS) and Services Export from India Scheme (SEIS) likely on the way out, it is imperative the budget looks at resource-allocation for WTO-compliant alternatives that can promote exports in the coming years.

    Robust Framework

    Businesses can leverage the value of India’s geographically unique products, boosted by the recent draft guidelines for the Geographical Indication (GI) logo and tagline. The budget should set clear expectations and timelines for implementation of the same. As progressive start-ups aid India’s export business cycle with digitization, the government should also make the Intellectual Property (IP) list more exhaustive. To combat unfair trade practices, and ensure trade partners follow international commitments, India needs to improve its IP framework. A showcase of the government’s iron will towards the protection and enforcement of IPs will improve global trust toward Indian products and increase exports.

    Trade Intelligence

    A government-led single portal assisting exporters and importers with daily trade-related data such as global trade notifications, per-day analysis of duties, and changes in regulation, amongst other features, would help the export community get better clarity and build deeper trust with external stakeholders. SMEs can benefit from ways to get market assistance via the trade intelligence unit, thereby increasing their global competitiveness. This move will reinstate the government’s commitment to reduce the fiscal export gap and send a positive signal to the industry.

    Access to Credit

    A key aspect behind slow SME growth at the grassroots level remains access to credit. With an ongoing cash crunch in the economy, SMEs are facing acute pressures in meeting their import, manufacturing and export cycles. Sitharaman’s efforts last year to push banks to lend to SMEs have been an important step in the right direction. Going forward, the budget will need to offer boosts to alternative credit providers, such as fintech start-ups offering trade finance options.

    (This article was first publised on financialexpresss.com)

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    Pushkar Mukewar
    Pushkar Mukewar
    Co-founder and Co-CEO, Drip Capital
    5 min read