Economic Survey 2023-24: States should reduce compliance burden on MSMEs

Economic Survey on MSMEs: India's micro, small, and medium enterprises (MSMEs) continue to face extensive regulation and compliance requirements, according to the Economic Survey presented on Monday. Access to affordable and timely funding remains a major concern for these enterprises.

The Survey for 2023-24, tabled in Parliament, recommended reducing the compliance burden on MSMEs to improve their growth prospects. It suggested easing compliance requirements through a single-window mechanism for clearances, digitisation of processes, and equipping MSMEs to handle these processes more efficiently. Additionally, it called for grassroots-level facilitation to ensure market access for MSME products.

The Survey highlighted that MSMEs often have limited management bandwidth to grow their businesses, seek new markets, secure funding, and hire labour. This bandwidth is disproportionately spent on compliance.

"While the Union government frames the rules, implementation or supervision is handled by inspectors and supervisors from relevant state departments. Senior bureaucrats at both the Centre and state levels should collaborate to make compliance easier for businesses without draining their time and resources," the Survey asserted.

The Survey also pointed out that threshold-based concessions and exemptions can inadvertently incentivise enterprises to limit their size below these thresholds. It recommended that such concessions and exemptions should have sunset clauses.

MSMEs face significant bottlenecks in securing necessary funds to start, operate, or expand their businesses. Challenges include lack of collateral or credit history, high interest rates, complex documentation requirements, and long processing times.

Strengthening India's MSME sector is central to the country's growth, as MSMEs contribute approximately 30 per cent of its GDP, 45 per cent of manufacturing output, and provide employment to 11 crore people.

To boost the MSME sector, the government has introduced initiatives such as the allocation of 5 lakh crore through the Emergency Credit Line Guarantee Scheme (ECLGS), a 50,000 crore equity infusion through the MSME Self-Reliant India Fund, and revised criteria for MSME classification. These initiatives aim to address key challenges, particularly access to timely and affordable credit.

(With PTI inputs)