MSME industry has urged the government to protect manufacturers from cheap Chinese imports as the Finance Ministry kicks off consultation process for Budget 2021-22.
Local manufacturers who could benefit include makers of auto components, furniture, cast items of iron and steel, ceramic items, bags and briefcase, among other items. The help can come in the form of import restrictions on Chinese products and easy access to finance for upscaling.
Federation of Indian Micro and Small & Medium Enterprises (FISME) has identified 660 products imported from China with import value of each product above $1 million. The aggregate value of imports amount to $10 billion.
Using Pareto principle, the list was mapped with MSME industrial clusters. Out of which, 15 clusters have been proposed for strategic interventions using WTO compatible tariff and non-tariff measures, financial products needed for capacity up-scaling, technical support needed for cost efficiency and market linkages.
"SIDBI-FISME initiative seeks assurance of support from MoF (Ministry of Finance)/CBIC (Central Board of Indirect Taxes and Customs) for specific interventions in customs duties and other measures needed to ramp-up domestic capabilities to counter Chinese imports in due course," FISME has demanded.
Noting that coronavirus pandemic has necessitated millions of small businesses to explore online route for sales, the industry body wants GST compliance parity between online and offline sellers. It has stated that selling online required MSMEs to be registered with GST even if their annual turnover was less than Rs 40 lakh. Similarly, the composition scheme prohibits a composite GST trader from selling goods online.
"Offline and online sellers need to be treated at par," it said in its pre-Budget recommendation. Among the regulatory measures, FISME has urged the government to make a distinction between not only the 'foreign firms' and 'domestic firms' but also the 'foreign-owned' firms and the 'locally-owned' firms (China model).
"This is one policy that India can leverage without defying WTO i.e. to attract JVs to access technology in manufacturing through the carrot of public procurement," the leading MSME body has argued. The Delhi-based industry grouping has also suggested to redesign credit rating format for medium enterprises and allow them to benefit from public procurement (Centre and states) which accounts for nearly one-third of the GDP.
In the MSME universe of 6.4 crore enterprises, medium enterprises constitute only 0.007%. The inability of Indian firms to compete globally is often attributed to this 'missing middle syndrome'. FISME noted that in policy dispensation they are considered as pariah and stressed on promoting them.
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