Turbocharging MSMEs

The most daunting challenges for India's Micro, Small and Medium enterprises (MSMEs) are the contraction of profits, lack of working capital and inability to expand beyond their local markets. Take the weavers of Kanchipuram, Tamil Nadu; Thousands of beautiful Kanjeevaram sarees are woven by weavers, and in turn, sold by other small retailers. For them the last two years of Covid-instigated restrictions have been nothing short of a nightmare. Inflationary trends and the global economic slowdown have only exacerbated this challenge further.  An estimate by the United Nation’s trade and development wing estimates that as many as 47% of MSMEs in India were either temporary or permanently closed in 2020-21.

On June 29, 2022 ; The GST(Goods and Services Tax) Council said online businesses with a turnover of less than Rs.40 Lakh will no longer need to register under the GST Regime, unless their turnover crosses the prescribed threshold. The change which is set to come into effect from the start of 2023, removes the single-biggest bottleneck that had held up their digital transformation and hamstrung growth. The MSMEs that wanted to go online but couldn’t make it because of mandatory GST registration can now jump on the E-commerce bandwagon and reap its benefits.

The move will be beneficial for self-help groups , small enterprises and empower women from rural areas as now they will have an access to a much larger customer base, in turn boosting the MSMEs’ earning potential, making them truly national players and resilient to local economic shocks. Given that this will lead to greater intra-state sales, the uptick in E-commerce activity will lead to much higher tax revenues for state governments, which can then be reinvested to improve logistics and supply chain infrastructure. This, in turn, will make the E-commerce ecosystem even more efficient, unlocking further gains.

Source: Article from The Economic Times,The Edit Page,Turbocharging MSMEs by Vidit Aatrey.