Small enterprises, big gains

Reserve Bank of India Governor Shaktikanta Das is a man on the move. In his brief stint at the bank, he has proved to be more of an extrovert than his predecessor Urjit Patel, who had little interaction with stakeholders, especially from industries and banks. But Das had spent long years in Lutyens Delhi and earlier in Chennai as a key bureaucrat in the finance ministry. While handling revenue and economic affairs, he constantly interacted with pressure groups, knowing how to deal with the steep demands and intense lobbying to which the finance and revenue secretaries are subjected to, especially ahead of the presentation of the Union budget.

When Das met the representatives of small and medium enterprises, there was surprise in Udyog Bhavan, which houses the low-profile ministry dealing with millions of small and medium entrepreneurs. The two sectors, which generate high amount of jobs and are vital for the thriving of large companies, have never been seen by politicians as very glamorous. They are often vested with the cabinet minister for commerce and industry, who hobnobs with tycoons around the world. Many a time, even the plantation division of the commerce ministry gets more attention in the corridors of power than the ministry of micro, small and medium enterprises (MSME). If it is not given to a senior minister, then MSME is given as a sop to ministers who make up different quotas. In the NDA government, Uttar Pradesh veteran Kalraj Mishra was first given this portfolio. After he reached the informal upper age limit for ministers in the Modi government, the charge went to Bihar’s Giriraj Singh. He is known more for his controversial remarks on politics and faith than for any groundbreaking policy initiatives for MSMEs, which were hit badly by demonetisation and the Goods and Services Tax.

Illustration: Bhaskaran Illustration: Bhaskaran

Relief had to come from Finance Minister Arun Jaitley, who is a tough customer for junior ministers to deal with. Even senior ministers like Nirmala Sitharaman and Suresh Prabhu, who handled commerce and industry, make special preparations when a subject comes up before Jaitley or in the cabinet committee of economic affairs. Hence, many MSME associations rout their demands through the powerful BJP president Amit Shah, a politician from Gujarat with a business acumen.

While there has been relief for some sectors initially and now a major reduction in GST rates, the MSME department and the minister have not been kept in the Central loop. Thus, when the economic crisis ballooned last year after the banks went after MSMEs on their loan defaults and also curbed fresh loans, the clamour for relaxing RBI norms on banks increased. That is when Modi and Jaitley put pressure on the Central bank to relax the rules, so that more money could be released. The government also came up with the 59-minute scheme where an entrepreneur could get clearances and loans for proposals within an hour of applying online. The ministry of finance designated officials of the Central Bureau of Indirect Taxes and Customs to be the nodal officers for helping entrepreneurs. But, the MSME ministry was not in the picture.

Das has shown that he knows that the MSME units are as important for the economy as the resolution of large bad loans given to big companies, which are getting resolved through the Insolvency and Bankruptcy Code. The Modi government is, therefore, wooing the large number of workers and entrepreneurs in the unorganised and semi-organised sectors.