MSME Associations worry over Gadkari’s move to include retailers and traders in MSME sector

Ease of Doing Business for MSMEs: In a longstanding demand from retail and trade industry associations, Minister of MSME Nitin Gadkari last week reinstated the status of retailers and wholesale traders as MSMEs.

With the revised guidelines the retail and wholesale trades will now be able to register on the Udyam Registration Portal.

While the move has been hailed by traders and retailers associations, several traditional MSME associations have expressed their concern about the MSME definition’s expansion.

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The Office Memorandum issued by the Ministry of MSMEs dated 2nd July 2021 stated that the ‘benefit of registration will be restricted to Priority Sector Lending’.

Industry Associations such as Federation of Indian Micro, Small and Medium Enterprises (FISME) have raised the concern about possible misuse of registration in other activities also.

In its statement, FISME said that traders will now be covered under the government’s public procurement policy. It is currently mandatory for central ministry, government departments, and PSUs to earmark 25 per cent of their annual procurement from the MSE sector to boost manufacturing in the country. The concern is that now traders will import and supply to the government. Also, traders will now be able to leverage promotional schemes such as International cooperation which were meant to promote India-made goods in international markets. “If appropriate checks are not brought in, it can be counterproductive to the government’s Make in India initiative,” Anil Bharadwaj, Secretary General, FISME, told Financial Express Online.

Vinod Kumar, President, India SME Forum said that while this is a step forward where the government is helping in reviving a sector, it is also encouraging people to become traders. “The government has acknowledged the need to boost entrepreneurship in the country to create jobs but to encourage manufacturing there is also a need to give them that privileged distinction through schemes and a differentiation in its status rather than including it in the same set as traders.”

In an earlier interview with Financial Express Online, Consortium of Indian Associations Convenor K E Raghunathan had said that the move will dilute the MSME sector that is already quite vast. He explained that good quality MSME data is absent in the country, and including over 2.5 crore traders and retailers will further complicate the issue. “It will be much more difficult to map data points around MSMEs in each district or state, making it difficult to analyse the problems to introduce the right provisions at the right time,” Raghunathan added. Moreover, existing support to MSMEs such as Government eMarketplace (GeM) portal, priority sector lending, and payment outstanding redressal by state facilitation centers will be weakened with such large additions, he concluded.

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