Welcome to Indian Industries Association, the apex body of SMEs.

President Speaks

Budget 2007 - 2008 : Sector Needs More Reforms

At the outset, I would like to thank the finance minister for accepting few proposals which Indian Industries Association had submitted to him. It seems that Small & Medium Enterprises sector is finally getting some attention, however the sector needs more reforms. The increase in Excise exemption limit to Rs.1.5crore and increase in the threshold limit in service tax to Rs.8 lacs is a welcome step but it is too little and coming too late. Ideally the threshold limit for service tax should have been increased to minimum Rs.15 lacs and the exemption limit on excise to minimum Rs.2 crores keeping in view the increase in the cost of inputs and the inflation.

Removal of surcharge on income tax for taxable income of Rs 1 crore or less, reduction of custom duty on raw material required for textile and the gems & jewellery sector, Excise duty relief on biscuits with consumer price of Rs. 50 per kg or less, and service tax exemption for Technology Business Incubators will help SME's to improve their competitiveness and are welcome steps, however, much more is still left to be done if SMEs are to be made fully competitive to face the onslaught of Liberalisation and Globalisation.

The Country has about 150 lakh registered or unregistered micro and small scale industries employing more than 10 crore people. If we compare the size and importance of this sector with the announcements made in the budget, it is clearly evident that much more is needed to be done without further delay.

Government may feel happy on 8.64% increase in the central plan outlay for SSI from Rs. 532 crore to 578 crore and allocation of 186.80 crore for credit support programme but this at best is a cosmetic tinkering which is too little for the size of the sector. Banks are asked to provide cheaper loans to SSI based on their ratings. This is not going to benefit about 80% of SSI's in todays situation because they are not in good health and ideally need loans at lower rates.

The major disappointment for Small Scale Sector has been continuation of FBT, no announcement for extension of the Credit Linked Capital Subsidy Scheme(CLCSS) beyond 31st march 2007 and 12.5% Service Tax on the leased premises. I hope Finance Ministry will reconsider corrections on these issues in the interest of this vital sector and overall economic development of the country. India cannot become a developed country without the development of the SME's.

Hence, this sector needs more reforms.