New MSME definition to benefit downstream textiles, boost exports: experts

Several exporters can now be classified as MSMEs and avail 5% rebate under interest equalisation scheme

The change in the definition of micro, small and medium enterprises (MSME) is set to offer major relief to the downstream sector and boost exports of textile and readymade garments, experts have said.

In the package announcement, the threshhold for micro manufacturing and services units was increased to Rs 1 crore by way of investment and Rs 5 crore by turnover. The limit for small units was raised to Rs 10 crore (investment) and Rs 50 crore (turnover). Similarly, the limit of medium units was increased to Rs 20 crore (investment) and Rs 100 crore (turnover). Earlier, these limits were significantly lower than the expanded figures.

The cabinet has approved revision in the definition of MSMEs under which the investment limit has been raised from the existing Rs 20 crore to Rs 50 crore and turnover limit from Rs 100 crore to Rs 250 crore for the medium size enterprises. Also, the cabinet has decided to exclude revenue collected through exports from the turnover limits fixed for MSME.

“With the change in definition, a large number of exporters in textile sector can now be classified as MSMEs and avail 5 per cent rebate under interest equalization scheme. This will make Indian textile products competitive in the world market and hence help boost India’s exports of textile which in turn will lead to employment generation,” said K V Srinivasan, Chairman, Cotton Textiles Export Promotion Council (Texprocil).

Manmade fibre textile industry would also be the major beneficiary as most of the textile units are under MSME. Higher threshold will include more units now and will give a huge fillip to the production, domestic supply and exports of manmade fibres textiles.  Apart from that spinning and weaving units will also get benefit of this revision.

The government also approved roadmap for implementing the remaining two packages for MSMEs, namely, a Rs 20,000 crore package for distressed MSMEs and Rs 50,000 crore as equity infusion through fund of funds.

“These measures would encourage MSME segment to expand their horizons, strengthen them to be a bigger contributor to the economy and boost exports,” said Ronak Rughani, Chairman, Synthetic & Rayon Textiles Export Promotion Council (SRTEPC).

MSMEs play a significant role in the Indian economy contribute towards 29 per cent of the gross domestic producct (GDP) and 48 per cent to India’s overall exports. At a time when, India’s textile industry is passing through unprecedented times due to months of nationwide lockdown to prevent spread of coronavirus (Covid-19), the change in MSME definition would provided a major relief for recovery in both domestic and export fronts.

“In the revised definition, even small weaving mills may be able to come and because of this many garment manufacturers will benefit,” said T Rajkumar, Chairman, Confederation of Indian Textile Industry (CITI).

The distressed asset fund of Rs 4,000 crore created to help weaker MSMEs that are struggling through non performing assets norms due to Covid-19 pandemic, will bring them back into the business and they can start activities afresh.