The Union Budget will be judged by what it does to revive and rejuvenate India's MSMEs, the Congress said on Tuesday, a week before Finance Minister Nirmala Sitharman is set to present the annual Budget.
Micro, Small, and Medium Enterprises (MSMEs) account for 30% of India's GDP and about 45% of exports, the grand old party said, adding that this sector employs 12 crore people and is responsible for most job creation.
"Yet, the Modi Sarkar has spent 10 years systematically bludgeoning India's MSMEs through a combination of deliberate policy and wilful neglect," the Congress alleged in a two-page statement.
The Congress claimed that demonetisation, botched GST, Covid lockdown, oligopolisation, and cheap Chinese imports had dealt a death blow to MSMEs.
It claimed that since 2014, the percentage of imports from China had risen from 11% of overall imports to 16%. "The uncontrolled dumping of these imports has rendered domestic MSMEs uncompetitive, forcing them to shut down."
"Gujarat, for instance, is home to 80% of India's stainless steel MSMEs, but 35% of them have had to shut down due to Chinna's export of cheaper steel," the grand old party said.
Listing the trouble facing the sector, the Congress said that MSMEs are faced with high tax rates, severe credit crunch, high input prices, and widespread closures. "Unsurprisingly, their contribution to GDP today is the lowest it has been in decades."
Finance Minister Nirmala Sitharaman will present Budget 2024 on July 23.
Earlier this month, it was reported the government may relax the requirement of making payments to MSMEs within 45 days of buying goods and services to check large corporations from looking at other sourcing avenues. An announcement to this effect could be made in the Budget.
"The government is considering suggestions regarding changes to Section 43B(h) of the Income Tax Act made by MSMEs during pre-Budget consultations," sources told news agency PTI. The government in last year's Budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country.
According to Section 43B(h) of the Income Tax Act, introduced through the Finance Act 2023, if a larger company does not pay an MSME on time -- within 45 days in case of written agreements -- it cannot deduct that expense from its taxable income, leading to potentially higher taxes.
MSMEs fear that due to this provision, large buyers could cold-shoulder MSME suppliers and start buying either from those MSMEs that are not registered with Udyam or from non-MSMEs.
The amendment was brought in for MSMEs to get timely payment, but there are a lot of fears were raised by them, sources said, adding that they feared that large corporations, in a bid to safeguard their interest, could shift their sourcing requirement to bigger firms or ask their vendors to give up their MSME registration to do business with them.
(With inputs from PTI)