Status Check: Does Budget 2014 meet SME expectations captured in Firstbiz-Greyhound SME Survey?

While many have cheered Finance Minister Arun Jaitley’s seemingly big focus on the MSME sector with a Rs 10,000 capital fund for such companies, Greyhound Research Chief Analyst & CEO Sanchit Vir Gogia does not see the Union Budget’s take on SMEs in quite such a positive light. He also believes that the Finance Minister’s comment that many Indian SMEs were run by members of the Scheduled Castes (SC), Scheduled Tribes (ST) and Other Backward Castes (OBC) was a patronising comment.

While presenting his first Union Budget on Thursday, Jaitley admitted that there was an urgent need to strengthen the micro, small and medium enterprises (MSME) sector of the country. “MSMEs are the backbone of our economy. They account for a large portion of our industrial output and employment. The bulk of service sector enterprises are also SMEs. Most importantly a majority of these enterprises are run by SC, STs, and OBCs.”

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Gogia explained, “While lot has been said about the MSME sector, one can see the focus revolving around a certain sections of the society, which is just plain wrong.”

But then, what about the Rs 10,000 crore fund for SMEs , a decision hailed by many analysts and start-ups alike. For instance, domain name registration company BigRock.com’s General Manager & Business Head Shashank Mehrotra, said, “We believe that the Union Budget for 2014-15 is a step in the right direction for MSMEs across the country. From the Rs 200 crore provision to set up a Technology Centre Network for MSMEs to the impetus for budding entrepreneurs and widening broadband penetration, these moves are set to give the MSME sector more government support than they have ever had before.”

However, unlike others, this decision again didn’t enthuse Gogia, who explained: “There has been no lack of funds in the past, but the main question here is how the government will ensure that these SMEs get funds at the right time. Last year during the UPA regime, money was allocated for textile clusters, but there’s no news where that funding has gone.” So, while announcements happen and funds may be allocated, availing these funds still remains a big challenge for SMEs, he added.

The government has also decided to set up a committee, including representatives from the Finance Ministry, Ministry of MSMEs, and RBI to re-examine the financial architecture of the MSME sector and give concrete suggestions in three months.

“Hopefully, this will not end up being just another committee.” “The Firstbiz-Greyhound Knowledge Group SME survey says 90 percent of SMEs are not fully aware of these funds. The committee should look at the aspects of how to channelize these funds to the right hands. The government should have an agenda that will drive the funds to the right people,” Gogia felt.

However, he is happy with the fact that this government has at least recognised that entrepreneurs exist in India. “Till now, the Budget never gave recognition to the entrepreneur community, but Jaitley did so, which is a good thing.”

In addition, Gogia also appreciated the Modi government’s move on the development of an entrepreneur-friendly legal bankruptcy framework for SMEs that will enable an easy exit.

You can download the Firstbiz - Greyhound Knowledge Group SME Survey here .