Modi govt 'systematically bludgeoned' MSMEs through wilful neglect: Congress

The Congress on Tuesday, 16 July, alleged that the Narendra Modi government spent 10 years "systematically bludgeoning" India's MSMEs through a combination of deliberate policy and wilful neglect, and asserted that the upcoming budget will be judged by what it does to revive and rejuvenate MSMEs.

Congress general secretary in-charge communications Jairam Ramesh said Prime Minister Narendra Modi and his government must "revisit their economic agenda, shed their cronyism, and end their whimsical policy-making".

He said Micro, Small, and Medium Enterprises (MSMEs) account for 30 per cent of India's GDP and about 45 per cent of our exports.

"They employ 12 crore people -- second only to agriculture -- and are responsible for most job creation. MSMEs, with their wide geographic dispersion, also promote balanced regional development. Yet, the Modi Sarkar has spent 10 years systematically bludgeoning India's MSMEs through a combination of deliberate policy and wilful neglect," Ramesh said in a statement.

Listing the policies and steps that harmed MSMEs, Ramesh said the virtual cessation of all economy activity during demonetisation forced many MSMEs, unable to pay employees or repay their debts, to close.

"Business systematically moved from smaller firms to bigger, more organised players," he said.

Ramesh further said the initial struggles with implementation of GST put many MSMEs out of business.

"Seven years later, however, GST continues to constrain MSMEs due to its high compliance burden, punitive enforcement, and slow disbursal of refunds. MSMEs do not have the resources to hire lawyers and CAs to deal with the compliance burden. Delayed tax refunds have led to working capital blockages, jeopardizing their financial stability," the Congress leader said.

Ramesh said the "haphazard" Covid lockdown and mismanaged pandemic control efforts, combined with the lack of an economic program to protect MSMEs, also "dealt a death blow to MSMEs".

Flagging the issue of rampant oligopolisation, he alleged that through favourable policy-making including corporate tax cuts, PLIs, and selective doling out of government contracts through the 'Chanda Do, Dhanda Lo' scheme, the Modi government has "sponsored the oligopolisation" of key industries.

Armed with governmental support and economies of scale, oligopolies have driven MSMEs out of the market, he said.

Raising the issue of cheap Chinese imports, Ramesh said that since 2014, the percentage of imports from China has risen from 1 per cent of overall imports to 16 per cent.

"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 China's export of cheaper steel," Ramesh said.

Consequently, MSMEs are faced with high tax rates, severe credit crunch, high input prices, and widespread closures, he said.

"Unsurprisingly, their contribution to GDP today is the lowest it has been in decades. The Indian National Congress's pro-MSME agenda includes -- extension of the Non-Performing Assets (NPA) classification period for loans to MSMEs from 90 days to 180 days," he said.

The Congress agenda also includes establishing GST 2.0, with a single, moderate rate and relief for small taxpayers like MSMEs, he said.

It also calls for lessening the burden of tax on MSMEs owned by individuals and partnership firms, and abandoning the policy of rampant oligopolisation that has crowded out MSMEs, Ramesh said.

He said the Congress agenda also calls for dedicated funds for MSME export capacity creation, and enhanced funding for start-ups.

It further includes fixing the $530 billion credit gap in the MSME sector through a dedicated credit fund and lower interest rates, he said.

The 45-day payment rule that became operational from 1 April 2024 has split the MSME community - some want it to continue while others feel it is a disincentive for large firms to do business with them, he said, adding that a middle path can and must be found.

Ramesh called for recognising MSME clusters across the country and provide for their growth and expansion, including through greater use of anti-dumping duties.

More effective use of anti-dumping duties is needed to protect domestic industries, he said.

"The self-anointed non-biological Prime Minister and his Government must revisit their economic agenda, shed their cronyism, and end their whimsical policymaking. This Budget will be judged by what it does to revive and rejuvenate India’s MSMEs," Ramesh said.

Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for 2024-25 in the Lok Sabha on 23 July.