5 major announcements by Nirmala Sitharaman for small businesses after becoming the Finance Minister
From a retail pension scheme for shopkeepers and loan melas for MSMEs to clearing vendor dues, read about the major initiatives taken by Finance Minister Nirmala Sitharaman to empower small businesses in the country.
After the Indian General Elections 2019 were won by the National Democratic Alliance (NDA), Nirmala Sitharaman became the first Indian woman to take full-time charge of the Finance Ministry. In 1970-71, then-Prime Minister Indira Gandhi had held the post briefly, but as an additional charge.
Taking over the portfolio from Arun Jaitley, Sitharaman presented the full Budget for 2019-20 on July 5, 2019, in the Lok Sabha.
With a focus on small businesses and kirana stores, she announced a retail pension benefit scheme for three crore traders and shopkeepers with annual turnover less than Rs 1.5 crore.
She then announced Rs 350 crore has been allocated for two percent interest subvention for GST-registered MSMEs on fresh or incremental loans, and also proposed the creation of a payment platform for MSMEs to enable filing of bills and payment on the platform.
Besides the Budget announcements, the Minister's focus on empowering small businesses continued through the next few months.
Here are some of Sitharaman's major MSME-focussed initiatives since she became Finance Minister:
Retail pension benefit scheme for traders and shopkeepers
In a statement, the government noted that under this scheme, all shopkeepers, retail traders, and self-employed persons will be assured a minimum monthly pension of Rs. 3,000/month after attaining the age of 60 years.
The press release added:
"All small shopkeepers and self-employed persons as well as the retail traders with GST turnover below Rs 1.5 crore, aged between 18 and 40 years, can enrol for this scheme."
Under the scheme, the government will make matching contributions in the subscriber's account. If a person contributes Rs 100 per month, the government will also contribute an equal amount as subsidy into the subscriber’s pension account every month.
Instamojo's Sampad Swain had positive words for the proposed pension scheme for shopkeepers. He termed it an "encouraging move", adding that the Indian retail space is still majorly driven by small business owners and traders.
"[The pension scheme] not only brings a long-term life plan for these traders, but also helps towards the gradual formalising of this majorly unorganised sector," he told SMBStory.
Loan melas for retail, agriculture, small businesses
In a bid to boost lending, Sitharaman on September 20 asked public sector banks to hold 'loan melas' in 400 districts to lend to desirable shadow banks and retail borrowers.
"Ahead of the festive season, banks will hold 'loan melas' in 400 districts in two tranches beginning on October 3 to approve loans to any retail or NBFC borrower," she said.
PSBs will focus on giving loans to the 'RAM' category - retail, agriculture and MSMEs, the minister said, adding that there shall be gatherings with banks and those NBFCs they have tied up and given liquidity as well as retail customers of the bank.
The loan melas may be held in 'shamiyanas' (tents), and the banks are expected to show they are pushing liquidity to NBFCs and customers.
On October 14, the Finance Ministry said loans worth Rs 81,781 crore were disbursed during the nine-day outreach programme or loan mela organised by banks that began on October 1.
Clearing vendor and MSME dues
In a major relief to the MSME sector facing liquidity shortage, Sitharaman, on August 23, announced that all pending GST refunds will be paid within 30 days. "Also, in future, all GST refunds of MSMEs will be paid within 60 days from the date of application," she said.
Besides GST refunds, the Minister said that various ministries have cleared dues of Rs 40,000 crore out of Rs 60,000 crore because of MSMEs for the supply of goods and services. She had also said the remaining amount, not locked in litigation, would be paid by the first week of October 2019.
"Government should not sit on overdue payments. The idea here is to ensure that there are no outstanding dues to services and goods supplied to different departments. My intention is to have government departments clear all pending payments whoever it should go," Sitharaman said.
A few days later, she set October 15 as the deadline for central PSUs to clear overdue payments to vendors and exhorted them to front-load capital expenditure.
"It was decided that all pending dues to be cleared by October 15 and by then, they will have a portal through which all dealers and contractors shall start monitoring their payment," Sitharaman said.
New export incentives
In September, Sitharaman unveiled over Rs 70,000 crore of measures for exporters and the real estate sector, including about Rs 30,000 crore new spending in plans such as setting up of a stressed asset fund, as part of efforts to boost economic growth from a six-year low.
"A Rs 1,700 crore annual dole will allow Export Credit Guarantee Corp (ECGC) to offer higher insurance cover to banks lending working capital for exports. This will enable reduction in the overall cost of export credit including interest rate, especially for MSMEs," she said.
Exporters responded saying that the incentives will help in boosting the country's exports and outbound shipments."
Federation of Indian Export Organisations (FIEO) said the new measures announced for the sector in form of incentives and refund of taxes will not only go a long way in enhancing the growth prospects in the short-term but will also give it a much needed boost in the medium-term and long-term.
FIEO President Sharad Kumar Saraf said the new scheme of Remission of Duties or Taxes on Export Products (RoDTEP) with revenue burden of up to Rs 50,000 crore for the government, looks attractive as it will neutralise all duties and levies suffered by the export products.
Boosting traditional entrepreneurship
Sitharaman, in her Union Budget speech, proposed measures to boost SC/ST and women entrepreneurship in the country, as well as setting up hundreds of clusters and incubators to make traditional industries, especially bamboo, khadi and honey, more competitive.
Divya Jain, Co-Founder and CEO, Safeducate, told SMBStory that the proposed cluster-based approach to train 75,000 skilled entrepreneurs in India "paves the way towards Digital India and Startup India, promote the development of cutting-edge and indigenous technological solutions, create high-tech jobs in India, upskill Indian professionals, and enable us to tap the ripening global market."
Sitharaman also announced the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) will create 100 new clusters for traditional industries in 2019-20, allowing 50,000 artisans to join the economic value chain.
She added that the Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE) is expected to set up 80 livelihood business incubators and 20 technology business incubators in 2019-20.
Sitharaman also proposed a mission for integrating traditional artisans and their products with global markets. In this context, she said, "Patents and geographical indications will be obtained for them where necessary."
(Edited by Saheli Sen Gupta)