Exit polls: MSMEs gear up for Modi’s potential comeback, eye enhanced ease of doing business

With the general election results set to be announced on June 4, exit polls predict a third consecutive term for the BJP and Narendra Modi as Prime Minister. While it is still early to confirm, India’s micro, small, and medium enterprises (MSMEs) are preparing for Modi’s potential return, hoping for an improved ease of doing business.

The Ease of Doing Business metric measures how simple, efficient, and accommodating the regulatory and administrative environment is for businesses operating in a specific country or region.

Talking to Business Today, an MSME owner from Kannauj, Uttar Pradesh, praised the BJP’s tenure for resolving numerous issues faced by MSMEs. Speaking anonymously, the attar manufacturer noted that in recent years, the once-dying industry has experienced a revival, gaining traction not only in India but also globally.

“But we need more assistance and friendly policy in credit,” he added.

Ease of doing business will be an important area for the BJP government, says Mukesh Mohan Gupta, President of Chamber of Indian MSMEs, adding that the expectations of MSMEs are very small from the government. They want timely and adequate finance at reasonable rates from the formal sector.

In terms of timely payments, Finance Minister, during her Budget announcement of 2023, had mentioned the 45-day payment rule where buyers are required to pay pending payments MSMEs within 45 days of receiving the order. For its execution, the FM said that the government would permit expense deduction on income tax claims for buyers only when they make payments to suppliers, i.e., the MSEs. However, this didn’t help the sector but on the other hand, led to cancellation of orders with many buyers diverting to large enterprises.

Gupta says that this is a serious concern as many MSMEs are worried about the cancelation of orders. “We suggest that the UDYAM registration should be mandatory for all MSMEs. It should automatically be allotted during incorporation of the entity like GST, ESI, PF, etc, and are made available to them. Thus, when all MSMEs will have UDYAM, there will not be any threat of order cancelation by certain MSMEs.”

Vinod Kumar, President of India SME Forum and Member - High Powered Monitoring Committee of National SC/ST Hub of StandUp India Member, Ministry of MSME, also highlights the need of simplifying GST as he mentions that this would ensure every enterprise --whether in manufacturing, trading or services and no matter how small--to be able to use the input tax credit and formalise their business.

President of All India Rubber Industries Association Shashi Singh notes that uniform GST, clusters for PLI scheme, and support to the MSME sector is crucial.

India has emerged as one of the attractive destinations not only for investments but also for doing business as it jumped 79 positions from 142nd in 2014 to 63rd in 2019 in ‘World Bank’s Ease of Doing Business Ranking 2020’ report after which it was discontinued. But there’s a lot to do, Gupta highlights.

"The tax benefits available to startups should be extended to MSMEs. An online Registrar of Firms, similar to the Registrar of Companies, should be established to enhance trust and transparency. The Credit Guarantee Scheme for Startups (CGSS) has not been properly implemented, and banks should be encouraged to support start-ups under this scheme. Medium enterprises are currently not benefiting from these initiatives, and all benefits should be extended to them as well,” he added.

Modi’s third term is expected to significantly improve the business environment for SMEs through comprehensive reforms, according to Sanjeev Sehgal, Founder & MD of Sparsh CCTV in Noida.

These reforms will focus on infrastructure development, local manufacturing, and advanced technology. A key example is the Semicon India Programme, which has seen its capital outlay increase by 130% to ₹6,903 crore for FY25. This growth is also expected to boost employment, as SMEs have high employment elasticity, meaning they create jobs at a faster rate than larger enterprises, he added.