Despite the hullaballoo over the SME sector, a majority of SMEs gave a tepid response to Union Budget 2016, according to a survey. Though the results were not very optimistic about Arun Jaitley and Company, the Government did manage to score a few points on other indicators. Let’s have a closer look at the good, the bad, and the ugly.
Boost for the SME Sector?
A majority of the respondents (72%) said that Budget 2016 fails to give the much-needed boost to the SME sector (25%–Yes; 3%–Undecided). A further 63% of enterprises believed that the Budget doesn’t have the policies to remove the bottlenecks that SMEs face today (33%–Yes; 7%–Undecided).
1) Do you think Budget 2016 will give the much-needed boost to the SME sector? Ans: 72%–No; 25%–Yes; 3%–Undecided
2) Does the Budget attempt to remove the bottlenecks that SMEs face today? Ans: 63%–No; 33%–Yes; 7%–Undecided
General Thrust of Budget 2016
Though a majority of the enterprises do feel that the general thrust of the Budget is in the right direction (65%), as many as 55% of them said that a lot more needs to be done to cater to the problems faced by the SMEs. Against key issues facing the sector such as infrastructure and finance crunch, (55%) SMEs were of the opinion that their main issues and concerns have not yet been addressed. This indicates that SMEs in India are still cash-strapped and not much help has been forthcoming from the Government. Easy finance remains an area in need of immediate and drastic intervention. Despite the economy looking up the sector is still unregulated and unorganized, the respondents said.
3) Is the Budget in the right direction? Ans: 65%–Yes; 30%–No; 5%–Undecided
4) Does the Budget facilitate problems of finance for the cash-strapped SME sector? Ans: 55%–No; 20%–No; 25%–Undecided
A majority of the respondents (55%) expressed positive sentiment about the some of the new announcements made in the budget such as one-day incorporation of companies, a silver lining in the cloud. When asked about the policy, though they were excited and eager to explore, they did strike a note of caution. “One-day incorporation is a good idea. But it will have to be implemented on the ground. I am still not clear how the scheme will work. If I want to get my company incorporated today, how do I go about it? Bureaucracy and red tape hit us every day. A number of questions still need to be answered and the specifics worked out,” one of the SMEs said.
5) Government has announced 1-day incorporation of companies. Do you think it will succeed, keeping the bureaucracy and red tape that exists in the country? Ans: 55%–No; 35%–Yes; 10%–Undecided
Make in India
Opinion was divided over the much-touted Make in India program and the government’s initiative to push the manufacturing sector within the SMEs (30–30%). There was a sizable chunk that didn’t have any opinion. Around 30% of the SMEs are in the manufacturing sector, with the rest in the services sector (Source: Ministry of Micro, Small & Medium Enterprises Development). If the Government’s Make in India campaign has to succeed it will have to push more SMEs into manufacturing and create favorable circumstances for such a transition.
6) Keeping in view the Government’s Make in India policy, does the Budget give policy incentives to the SMEs engaged in manufacturing? Answer: 30%–Yes; 30%–No; 40%–Undecided
Ease of Doing Business?
Owning and running a business in India is still a tough nut to crack. India’s position is 130 out of 189 countries as far as the ease of doing business is concerned, says World Bank Report 2016. Singapore tops the list. In fact, India’s neighbors, such as Nepal and Sri Lanka, have fared better on the list, being placed at 99 and 107 positions, respectively. Against this context, respondents were asked about the ease of doing business in India. Opinion was again divided with 40% rooting for improved conditions (35% didn’t agree whereas the rest were undecided).
7) Has the ease of doing business improved markedly? Ans: 40%–Yes; 35%–No; 25%–Undecided
Startups Vs. SMEs
A majority of the SMEs also felt that though the Budget is trying to encourage new ventures, the ones that are already functioning in the sector haven’t been taken care of. “It’s good to pave the way for the creation of new startups. But what happens to us? We are already in the field and have to slug it out every day. Banks don’t give loans. There is no certainty of infrastructural support. Electricity supply is uncertain,” said another SME. The SME sector is considered as the backbone of the Indian economy, employing around 40% of India’s workforce, contributing 45% to the total manufacturing output, and 40% of exports. The survey was conducted by Deskera, a software solutions provider in the SME sector. A total of 876 SMEs, from all over the country, participated in the survey. Tier I, II, and III cities were covered. Tier I comprised metropolitan cities such as Delhi, Mumbai, Kolkata, and Bangalore. Tier II included cities such as Patna, Lucknow, and Ahmedabad. Tier III cities included cities such as Dehradun and Jammu. The voters were mostly SME entrepreneurs who owned businesses or were in a decision-making capacity in their organization.