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BW Businessworld

More Power To The MSME Sector

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The micro, small and medium enterprises (MSMEs) have given a thumbs-up to the budget announcements made by Finance Minister P. Chidambaram that is set to address some of the issues in the sector. 
“Small and medium enterprises, including start-up companies, will be permitted to list on the SME exchange without being required to make an initial public offer (IPO), but the issue will be restricted to informed investors. This will be in addition to the existing SME platform in which listing can be done through an IPO and with wider investor participation,” Chidambaram said in his budget speech.
V.K. Aggarwal, president, Federation of Indian Micro, Small and Medium Enterprises (IMSME) says that the three year extension given to small companies is in line with what the sector has been demanding for years. "The biggest problem for MSMEs is that of finance, and while doubling Sidbi's refinancing capabilities is a welcome step, government must do something to help the financing of small companies," he adds. 
Dinesh Agarwal, Founder and CEO, says the budget is definitely a positive one for the MSME community"By increasing the budgetary support for Sidbi for microfinance equity fund,  the finance minister has ensured that the financing needs of MSMEs are taken into consideration and they are able to growth at an optimum pace," he says. 
Industry experts say that while more clarity is required on the listing part the government this is likely to address the fund raising issue for the small companies. “The government should allow the banks that are funding the SME which is being listed, to subscribe its (SMEs) IPO. The SME exchange has not been as successful at it was expected and we hope the recent steps in the budget would help,” says IMSME's Aggarwal.
One of the most striking announcements by the finance minister was that around the corporate social responsibility. Now MSMEs investing in technology incubators would be able to treat these investments as corporate social responsibility (CSR). According to the government norms, large companies are required to pay at least 2 per cent of their average net profits for CSR.
“While it is a welcome step that incubation be treated as CSR, this should not be restricted to technology start-ups and should be extended to incubation of social enterprises," said Shilpi Kapoor, CEO of the Mumbai-based Net Systems Informatics (N-syst), a leading accessibility consulting and knowledge management firm. "There is a funding crunch for start-ups, though not as acute as it is believed to be. The step would hopefully raise the risk appetite for technology companies." N-syst, a for profit social enterprise, works towards creating technology that empowers the disabled. 
"Proposal to qualify contribution to approved schemes of Ministry of MSME as Corporate Social Responsibility expenditure will aid the sector," adds Alok Saraf, executive director with private and entrepreneurial group, PwC India
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