Innovative financial solutions to boost MSME growth in India: Nasscom

New Delhi, Nov 28 In order to boost the MSME growth in the country, there is the need for innovative financial solutions and banks should improve transparency in loan approval processes and eliminate unused credit charges, according to a report on Thursday.

MSMEs are a cornerstone of India's economy, contributing nearly 30 per cent of GDP, 45 per cent of manufacturing output and 46 per cent of exports in fiscal year 2024.

According to a report by Assocham in collaboration with Egrow Foundation, introduction of MSME-specific bonds and mutual funds to enhance financial liquidity, promotion of mobile banks to serve informal micro-enterprises as well as the expansion of Small Finance Banks (SFBs) to better serve rural and semi-urban areas are some of the suggestions.

“The report lays out a strategic plan and roadmap for the MSMEs on India's path to become a developed country by 2047. The recommendations will serve as a valuable resource in making informed and strategic policy decisions,” said Assocham President Sanjay Nayyar.

“Our strong base of formal and informal entrepreneurs would need strategic support from the government - Centre and states, banks and conglomerates to be a critical partner in realising the national aspirations,” he added.

The study further recommended that the corporate income tax rate for MSMEs should be reduced from 25 per cent to 15 per cent, suggesting a simplified Goods and Services Tax (GST) system to ease procedures for compliance.

It also suggested alleviating the TDS (tax deducted at source) burden by limiting tax deductions to essential payments and implementing a unified tax system based on turnover for certain MSMEs.

“Realising the goal of Viksit Bharat would require structural changes in India 's business paradigm. MSMEs have to be part of this structural transformation. A developed India would have a vibrant role for the MSMEs. Our study underscores this point emphatically”, said Deepak Sood, Secretary General, Assocham.

With India's nominal GDP projected to increase from $3.5 trillion to $22.8 trillion, the report outlined a structural economic transformation expected over the coming decades.

A significant rise in per capita GDP from $2,485 to $14,000 would be driven by an expanding and dynamic workforce projected to reach 76.9 crore people by 2047.

Dr Charan Singh, Founder of EGROW Foundation, asserted that MSMEs can address the issue of rising labour force due to demographic dividend and provide productive employment.

“To encourage MSMEs, like setting up the Agriculture Universities, each state may like to consider having a MSME University to provide support to the products in their state,” Singh added.

Source: IANS