India has made the manufacturing sector more complex for small and medium enterprises by creating many stringent rules, such as those related to land use, India’s Chief Economic Adviser V Ananth Nageswaran said on Monday. Speaking at an event at India Exim Bank, Nageswaran said that this issue will be included in the economic review to be released on January 31.
“Land is subject to various regulations and enterprises are not able to make full use of it,” he said. No law-abiding MSME firm is able to utilize even 20 to 30 percent of the land on the ground floor. We have made manufacturing more complex.
He said manufacturing units are built on stilts as the use of ground floor is restricted due to parking norms etc., which means the land cannot be fully utilised. He said, ‘India has the lowest per capita land availability among the G-20 countries and there is a shortage of this resource.’
Referring to the challenges faced by MSMEs due to the changes made through Section 43(B) of the Finance Act, CEA said there is a need to consider political economy and behavioral sustainability. He said that the government has asked MSMEs to make timely payments as working capital is important for them, but big companies are demanding withdrawal of this rule.
As per provision of 43(B), the payment made to MSME can be deducted only when the payment is made to the firm and if there is no contract with the MSME then the payment will be made within 15 days.
On improving credit access to MSMEs, Nageswaran said there is a huge potential for credit access to MSMEs if banks take decisions based on earnings instead of lending against collateral.