There has been a strain on the micro, small and medium enterprises (MSME) sector following demonetization and the implementation of the Goods and Services Tax.
Last year the government implemented several measures, including cutting the corporate tax rate to 25 per cent for companies with an annual turnover up to Rs 250 crore from Rs 50 crore, which would leave more investable resources with 99% of 7 lakh firms filing their tax returns.
The idea was to enable them to not only reinvest and expand, but also help them spend more on research and development.
This year we all know that the government is unlikely to implement a whole lot of measures, given the fact that it is only an Interim Budget. In the past big ticket measures have been avoided by the government in the interim budget, however, the government can consider some leeway for the MSME sector.
It is well-known fact that the Indian micro, small and medium enterprises sector is suffering from lack of easy finance and proper credit instruments. The real problem is that banks mostly offer credit against a collateral, and MSMEs, particularly micro and small exporters, are not in a position to do so, depriving them of access to the formal credit market.
Further, the sector also faces limited access to export credit and export insurance. If somehow the Interim Budget can drive credit facilities for the sector, it will ease worries. The hope is that the government delivers for the sector in 2018-19.